Lahore - Pak Suzuki Motor Company (PSMC) has announced to increase prices of its all car models by 3 percent, which translates into Rs20,000 – 30,000/- per unit to maintain its profit margin despite around 207 percent hike in profits in 2015.
This is the first across the board price hike announced by PSMC in 2016. Earlier this year, price of one of its models, Suzuki Wagon R, was increased by 2 percent.
Industry sources said that the PSMC is also planning to raise prices by another 2 percent during the current fiscal year to maintain high margins of around 10-15 percent.
In March, the company announced a net profit of Rs5.8 billion or earnings per share (EPS) of Rs70.9 in the year ending on December 2015, up 207 percent compared to Rs1.9 billion.
In the fourth quarter (Oct-Dec) of 2015 alone, the company posted a profit of Rs1.8 billion, up by a massive 479 percent, from Rs311 million in the same quarter last year.
During 2015, revenues of the company improved substantially by 58 percent year-on-year (YoY), while gross margins improved by 579 basis points (bps) to 13.6 percent from 7.8 percent during 2014.
The company sold 133,660 units in 2015, up 72 percent YoY. The revenues grew by 86 percent year-on-year to reach up to Rs23.5 billion in the fourth quarter of fiscal year, 2015-16 (4Q2015) as company sold 36,712 units in the fourth quarter (+97 percent YoY).
Experts attribute this increase in volume to the Punjab Taxi Scheme introduced in provincial budget for the fiscal year 2015-16. PSMC then offered a discount to the Punjab government after it placed a huge order.
Gross profits improved substantially to Rs3.2 billion (+271 percent YoY) in 4Q2015 while gross margins rose by 677 bps to 13.6 percent year on year.
This happened due to 22 percent YoY fall in international steel prices
during the fourth quarter of 2015 and favourable exchange rate movement as the dollar and rupee appreciated against Japanese yen by 5.3 percent YoY and 2.4 percent YoY, respectively.
Other income grew by 348 percent YoY to Rs318 million in the fourth quarter of 2015 as the company earned interest on advances received from customers owing to strong car demand.
Distribution expenses surged to Rs445 million (+184 percent YoY) led by increased sales.
On quarter-on-quarter (QoQ) basis, revenue of the company posted an increase of 11 percent from Rs21.2 billion in third quarter of fiscal year 2015-16 (3Q2015) due to 8.7 percent QoQ volumetric growth.
Last week, Pak Suzuki announced its second-quarter (Apr-Jun 2016) results and posted a profit of Rs488 million, down by 67 percent from Rs1.47 billion in the same quarter of last year.
According to Topline Securities, the result was below market expectations.
Sales fell 7 percent year on year to Rs19 billion in the second quarter of 2016 (2Q2016). This decline was mainly due to drop in volumetric sales post culmination of Apna Rozgar Taxi Scheme of the Punjab government.
PSMC’s sales in the outgoing quarter were 26,011 units, a decline of 19 percent year on year (down 11 percent year on year to 56,192 units in first half of 2016 (1H2016).
Excluding taxi units (Ravi and Bolan), sales were robust as they increased 23 percent year on year to 16,911 units in 2Q2016 (17 percent year on year to 34,864 units in 1H2016).
Any adverse exchange rate movement, implementation of international safety standards, and reduction in import duty are key risks for the company, the experts said.