Pak Suzuki declares huge loss of Rs1.52 billion in first half despite multiple increases in prices

KARACHI: Pak Suzuki Motors (PSMC) has declared massive loss of Rs1.52 billion for the first half ended June 30, 2019 despite multiple increase in prices of vehicles during the period.

According to half yearly financial results submitted to Pakistan Stock Exchange (PSX), the company posted net loss of Rs1.525 billion as compared with growth of Rs1.29 billion in the corresponding half of the last fiscal year.

According to Topline Securities, Pak Suzuki Motors posted loss per share (LPS) of 6.62 against earning per share (EPS) of Rs 4.78 for the quarter April to June 2019 in same period last year.

Significant decline in earnings was mainly due to massive reduction in gross profit margins by 5ppts.

During outgoing quarter revenue of the company witnessed a mere 1 percent YoY growth to Rs31 billion despite multiples hikes in prices owing to declining volumetric sales in said period.

Gross profit margin were down by 5ppts, due to significant PKR depreciation against USD by 14 percent in 2QCY19 coupled with inflationary environment leading to high input costs.

§ Distribution cost has increased by 56 percent YoY due to higher transportation costs (from factory to dealer) which is currently borne by the company.

The company has booked a tax reversal (higher tax recorded in previous accounts) owing to change in turnover expectations.

Other Income has witnessed decline of 76 percent YoY mainly due to low income from bank deposits as the company has reduced cash balance in its accounts after decline in advance payments from customers.

Finance cost has increased by 1.8x YoY due to addition of short term borrowings in the outgoing quarter.

Key risks to company includes 1) Further PKR depreciation 2) slowdown in economy and 3) Entry of new auto players resulting in stiff competition.

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