Pak Suzuki Motors Company, the producer of Pakistan’s top selling cars, has witnessed a sharp decline in its profitability by 55 percent by the end of third quarter of 2016. This is mainly due to declining sales of its different car models in the local markets in tandem with gradual slowdown in demand.
According to the financial results declared by the board of directors, the automobile company could only make a profit of Rs 1.873 billion in the nine months of 2016 — down from Rs 4.24 billion profit that it made during the same period last year.
Sales drop of cars were chiefly because of the culmination of Taxi Scheme which boosted the profit of Pak Suzuki Motors to an unprecedented all-time high level in terms of sales of cars and Hi-Roof units, and the amount of revenues and profit in the history of the company.
As the Punjab Rozgar Scheme is over, not only sales of Ravi and Bolan models related to this scheme dropped but overall sales of Suzuki are gradually on the decline which caused downfall in its earning.
According to balance sheet, the quarter from July to September of 2016 saw a worse season in which profit of Pak Suzuki plunged by 76 percent compared with the corresponding period of 2015.
In this period, the profit of Pak Suzuki merely stood at Rs 438 million as compared to Rs 1.817 billion profit recorded in the similar period of last year.
Surprisingly, the decline in profit was seen despite of the fact that automobile company raised the prices of its different models at the start of the quarter in August.
Pak Suzuki sales volume in the outgoing quarter decreased by 34 percent to 25,201 units when compared with similar period last year.
The company recorded a significant increase in its expenses and administrative cost which also eroded its profit growth.
Its gross profit fell massively by 63 percent YoY to Rs1.25 billion in the outgoing quarter while gross margins contracted by 9ppts to 7 percent. This can be attributed to the 1.5 percent appreciation of Japanese Yen (JPY) against the local currency in the outgoing quarter. Further, higher input cost due to higher steel prices kept gross profit margin of the company under pressure.