KARACHI: The profitability of auto sector (all big three OEMs) has declined during 4QFY20 to a net loss of Rs1,934 million as compared to net profit of Rs3,155 million in 4QFY19 and net profit of Rs1,710 million in 3QFY20.

According to JS Research, the result was always on the cards, considering record low volumes during the quarter amid the lockdown. Owing to low volumes, revenues plunged by 70% YoY in the quarter while the sector witnessed a gross loss of Rs883 million.

The selling/distribution expenses contracted 59% YoY in tandem with low volumes, and administrative expenses also shrank by 17% YoY as companies tried to cut costs given the challenging scenario prevailing in the quarter, it said.

However, the higher finance costs were inevitable, rising sharply by 119% YoY, mainly on account of Pak Suzuki (PSMC) due to its precarious situation and high short-term borrowing requirements amid lower cash generation.

The quarter has been challenging for the auto players.

However, after easing in the lockdown restrictions, looking at the recent monthly sales in July 2020 and the situation ahead is expected to be significantly better for the sector, and some support to volumes is anticipated given the lower financing rates and special promotion packages being offered by auto assemblers, it added.

Copyright Business Recorder, 2020