Pak Suzuki Motor Company Limited, which is the largest player in Pakistan’s automobile industry, has announced its financial results for the nine months that ended on September 30, 2019.
The company reported a loss of Rs. 2.68 billion during the period. The car manufacturing firm booked a profit of Rs. 1.39 billion in the same period last year.
However net sales during the nine months were recorded at Rs. 91.06 billion, which were up by 2.22% as compared with Rs. 89.01 billion, on the back of double-digit percentage increase in the average price of products despite volumes dropping by 14.4%. Higher prices in the current period contributed in increased sales revenue by 2.22% over the same period last year.
The cost of sales increased by 8.40% to Rs. 89.92 billion as compared with Rs. 82.96 billion which took the gross profit down by 81.20% to Rs. 1.14 billion compared to Rs. 6.05 billion on the back of consistent Rupee devaluation against the US dollar resulting in increased imported material cost, consequently adversely affecting the gross profit margins. The company has recorded an eight-year-low gross profit according to the data available.
Consequently, higher prices of vehicles have affected the sales volume of the company as price hikes have weakened the purchasing power of customers. However, the impact was gradually passed on to the consumers.
|Nine months 2019 Volumes|
During the nine-month period, the company saw a massive 14.4% decrease in its sales volume. Mehran has been discontinued by Suzuki and it has been replaced by Alto, for which the company sold almost 14,628 units during the period.
However, the new Alto is receiving an overwhelming response from the customers and is setting off the damage caused by the discontinuation of Mehran. Swift’s sales were also down by 38%, with Cultus dropping by just 1.31% and Wagon R seeing a decline of 18.53% in its volumes. The company sold over 16,506 units of motorcycles as compared with 23,146 units in the same period last year.
There was a 7.7 times surge in finance cost due to an increase in debt borrowings and an increase in interest rates. Lower customer deposits forced the company to rely on borrowings to finance its working capital requirements, which resulted in a massive increase of 772% to Rs. 1.09 billion in finance cost against Rs. 125.14 million in the same period the previous year.
Administrative cost increased to Rs. 1.81 billion, while other income of the company decreased to Rs. 147 million from Rs. 479 million. The company reported a loss per share of Rs. 32.64 as compared with earnings per share of Rs. 16.92 in the same period last year.
The economic slowdown is highly visible in the automotive industry as sales are nose-diving. The fear of the taxman where the non-filers are not buying cars as their apprehension is that FBR may ask questions. Plus the increase in interest rates, which is at 13.25% has also played its part in bringing down the sales as it is not feasible for the consumer.
However, PSMC’s shares at the stock exchange were closed at Rs. 155, up by Rs. 2.20 or 1.44% with a turnover of 172,000 shares on Friday.