Pak Suzuki profits up 33pc

[Naveed Yaseen]

By Hina Mahgul Rind

KARACHI: With the improvement in car sales in the quarter ended on September 30, 2009, Pak Suzuki Motor Co (PSMC) posted a 33 per cent increase in its profit after tax which stood at Rs51 million during the quarter.

In the same quarter last year, the company earned pure profit of Rs38 million. This translated into earning per share (EPS) of Rs0.62 compared to Rs0.48 recorded in the corresponding period in 2008.

The picture for nine months (Jan-Sept 2009), however, remained somehow depressed owing to sluggish sales of vehicles, analysts observed. Net profit for Jan-Sept 2009 dropped to Rs212 million (EPS Rs2.58) compared to Rs636 million (EPS Rs7.74) in the same period last year.

The company’s turnover stood at Rs8 billion for the quarter Jul-Sept 2009, a 5 per cent increase compared to Rs7.6 billion in the same period of last year. The turnover for Jan-Sept 2009 declined to Rs17.7 billion against Rs32.9 billion recorded in Jan-Sept 2008.

Atif Zafar, auto analyst at JS Research, said that the PSMC Jul-Sept 2009 volumetric sales have increased by 56 per cent quarter-on-quarter basis.

He said that Pak Suzuki is benefiting from its pricing strategy. With the recovery in domestic economy along with price cuts by PSMC, the dominant player in 850cc segment with 85 per cent market share, the demand for low-end cars has improved.

In addition to this, high-end segment cars are becoming less affordable for mass market. Pak Suzuki will remain the major beneficiary, as it is the dominant player in the economy-class segment.

Atif said that overall auto sector showed six consecutive months of growth except in September 2009 in which car sales dropped due to Ramazan and less working days on account of Eid holidays.

Month-on-month basis, Pak Suzuki is showing consistent recovery in its sales as the company has made sequential price cuts across the board. In order to recapture lost market share and to achieve economies of scale, the company cut its prices (2-6 per cent) in April 09 on most of the categories.

He added that some of the reasons for improved car sales is decline in car prices, higher taxes on imported cars and economic stability along with this interest rates have also decreased which has also helped in auto leasing and Pak Suzuki has also started auto leasing.

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