Pak Suzuki Reports a Loss For the 6th Consecutive Quarter - Android

By Jehangir Nasir & Hasan Saeed Pak Suzuki Motor Company Limited, which is the largest player in Pakistan’s automobile industry,… Read More

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By Jehangir Nasir & Hasan Saeed

Pak Suzuki Motor Company Limited, which is the largest player in Pakistan’s automobile industry, has announced its financial results for the first quarter ended March 31st, 2020.

The company reported a loss of Rs. 941.11 million on the back of a massive reduction in sales. The car manufacturing firm had booked a loss of Rs. 980.74 million in 2019, according to a notice sent to the Pakistan Stock Exchange (PSX) on Thursday. According to Capital Stake, Pak Suzuki Motors has declared its 6th consecutive quarter making a loss.

Net sales during the quarter dropped massively by 50% to Rs. 17.74 billion, as compared with Rs. 34.44 billion in the same period last year. With the drop in sales, the cost of sales also decreased by 50% to Rs. 17.16 billion as compared to Rs. 33.32 billion. Gross profits dropped by 49% to just Rs. 572 million compared to Rs. 1.11 billion recorded in the same period last year. The decline in sales was due to increasing car prices and high-interest rates for car financing.

During the start of the year, Suzuki increased the prices of all of its variants in the range of 4-7%, which helped the company to maintain the gross margins at 3.25%. However, the company saw a gigantic slump in sales volume for cars and light commercial vehicles as the volumes declined by 63% from 36,412 units to 13,605 units.

It is worth mentioning that Mehran had been discontinued by Suzuki last year and was replaced by Alto. Consequently, higher prices of vehicles have affected the sales volume of the company.

Suzuki saw a 223% increase in finance cost as lower customer deposits forced the company to rely on borrowings to finance its working capital requirements amidst high inventory levels as sales remain slow.

It reported a loss per share of Rs. 11.44 in this quarter as compared with a loss per share of Rs. 1.92 in the same period last year.

The company booked a net tax benefit of Rs. 384.39 million during the 1st quarter, 2020. It had reported a loss before tax of Rs. 1.32 billion and after the tax credit, the loss was minimized to Rs. 941.11 million during the above mentioned period.

While the previous quarter wasn’t impacted that much at the start by the coronavirus pandemic but in the last month, sales dropped by 50% on a month-on-month basis. This was the biggest drop in sales amongst the big three companies Honda, Toyota, and Suzuki. Now due to the lockdown, they have closed all operations and this will impact both the production as well as sales.

It is highly likely that the company will be seeking to increase the price of their cars as the dollar has devalued against the rupee (Toyota has already done this) and they will be looking to make up for the lost sales and profit.

It will be interesting to see how the company recovers from this because the current crisis has hurt the savings of its customers too and it will be hard for them to buy new cars. We see even tougher times ahead.

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