Pak Suzuki Motor Company Limited, which is the largest player in Pakistan’s automobile industry, has announced its financial results for the half year that ended on 30 June 2021.
It reported a profit of Rs. 1.2 billion during the first half of 2021 after a loss of Rs. 2.46 billion in the same period last year, according to a notice sent to the Pakistan Stock Exchange (PSX).
Pak Suzuki Motor Company Limited’s (PSMC) net sales skyrocketed to Rs. 66.11 billion, up by 141 percent as compared to Rs. 27.47 billion that was recorded in the same period last year. The increase in sales was due to a recovery in its sales volume as it recorded a volumetric growth of 137 percent year-on-year. It sold 50,096 units in 1HCY21 against 21,116 units in 1HCY20.
The gross margins were settled at 5.98 percent during 1HCY21 as compared to the negative gross margins of 0.14 percent in 1HCY20, according to a report by Arif Habib Ltd. The increase in the margins was on account of higher vehicle prices and volumetric growth.
The PSMC’s gross profits were increased in absolute terms by Rs. 3.994 billion from a gross loss of Rs. 40 million (January-June 2020) to a gross profit of Rs. 3.95 billion (January-June 2021). The gross profit margins as a percentage of net sales improved from a negative margin of 0.14 percent to a positive margin of six percent.
Furthermore, improvement in the PSMC’s liquidity position contributed to a reduction in financial charges and an increase in interest income. The financial charges were reduced by Rs. 1.649 billion (85 percent) from Rs. 1.941 billion in 2020 to Rs. 292 million in 2021.
Recovery in the economy has also contributed to the company’s profits.
The PSMC’s earnings per share were Rs. 14.54 against a loss per share of Rs. 29.92 in the same period last year.
It said, “Major incentives were allowed to vehicles up to 1000cc which includes removal of Federal Excise Duty (FED), reduction in the sales tax rate to 12.5 percent, and abolishment of Additional Customs Duty (ACD). For higher segment vehicles, FED reduced by 2.5 percent and ACD reduced to 2 percent. Consequently, OEMs passed on the above incentives to customers by reducing the prices. Another relief was the reduction in minimum income tax from 1.5 percent to 1.25 percent of turnover to support low-margin companies”.
The company highlighted that long-term consistent policies are vital for the growth of the auto industry. The current auto policy was applicable for the period 2016 to 2021, and a new auto policy is expected to be announced soon. It is expected that the new auto policy will be industry-friendly by offering incentives to Original Equipment Manufacturers (OEM) and vendors.
“However, uncertainty still prevails due to the fourth wave of COVID-19. Yet the company is endeavoring to improve sales, profitability, and diversity in its operations by upgrading the existing products and offers quality products to customers at competitive prices through an efficient network of authorized dealers,” it added.
