Pak Suzuki Motor Company Limited always endeavors to enhance profitability, sales and diversity in its operations by upgrading the existing products and introducing new products. The management of the Pak Suzuki introduced its first crossover ‘Suzuki Vitara’ on December 21, 2016 and 1400cc sedan ‘Suzuki Ciaz’ on February 8, 2017.
The experts of the company predicts that introducing of ‘Ciaz’ and ‘Vitara’ would support Pak Suzuki to penetrate in higher segment vehicles. Pak Suzuki also introduced new Suzuki Cultus on April 22, 2017. The new Suzuki Cultus brings with power-packed features like ABS brakes, airbags, electronic power steering, electric windows and electrically adjustable side view mirrors. Its modern 3-cylinder 1000cc k-series engine ensures great fuel efficiency and is designed to provide an extraordinary driving pleasure.
With the launch of new Suzuki Cultus, the Company has further strengthened its position in 1000cc hatchback segment. Pak Suzuki is notable example that achieved the expansion in plant capacity and development of new models through own resources.
Finance managers of the company mentioned that during the period (January-June 2017) the industry sales volume for vehicles and light commercial vehicles rose by 9 percent as against to the same period of last year. During the period under review 115,586 units were sold as against to 105,959 units during the same period of last year. They also mentioned in a statement that the sales volume of Pak Suzuki enhanced by 9 percent from 57,428 units (January-June 2016) to 62,494 units (January-June 2017). Major rise in sales was recorded in sales volume of 1000cc car segment, mainly Suzuki WagonR.
Sales volume of Suzuki WagonR rose by 79 percent from 5,644 units in 2016 to 10,103 units in 2017.
The management also sustained 54 percent market share of Pakistan’s total market of cars and light commercial vehicles. The management had to adjust its production according to market demand.
Furthermore, financial adepts calculated that during the period 59,354 units were produced as compared to 54,312 units same period of last year. This production level showed 79 percent capacity utilization. The organized market (PAMA member firms) for motorcycles and three wheelers rose by 18 percent from 707,305 units to 835,347 units.
The Company sold 9,453 units against 8,857 units in the same period previous year. Sales volume of motorcycles stayed stable as the key growth in motorcycle industry was recorded in 70cc engine capacity motorcycles. The management earned net profit Rs1,992 million as against to Rs1,435 million in the corresponding period of previous year.
Net sales revenues rose by 20 percent (Rs7,840 million) from Rs38,989 million to Rs46,829 million chiefly because of enhanced sales volume in period. Gross profit rose in absolute terms by Rs842 million from Rs3,983 million to Rs4,825 million. Gross profit margins as a percentage of net sales remained consistent at 10.3 percent in 2017 as against to 10.2 percent in 2016. Furthermore, distribution expenses rose by Rs375 million from Rs1,007 million in 2016 to Rs1,382 million in 2017. Higher advertising and sales promotion expenses incurred as a result of new models introduced in the period under review. Administration expenses declined by 10 percent from Rs816 million to Rs736 million, mainly because of provision for doubtful debts of Rs97 million was offered for receivable from motorcycle dealer in the same period of previous year which was partly reversed by Rs20 million in 2017.
Other operating income declined from Rs590 million to Rs445 million. As per State Bank’s Circular BPRD Circular No. 2 of 2017 dated February 24, 2017, banks have been directed to obtain 100 percent cash margin on import of CBUs, CKDs and automotive components, the finance managers of the company added. Application of 100 percent margin on imports has unfavorably affected the liquidity position of Pak Suzuki consequently declining the income on bank deposits.
Financial cost declined from Rs84 million to Rs41 million. The reason was declined in exchange loss by Rs47 million. Exchange loss of Rs27 million incurred during the period under review as against to Rs 74 million in the same period of previous year.
Other operating expense shows contributions for Workers’ Profit Participation Fund and Workers’ Welfare Fund. The aggregate amount rose from Rs184 million to Rs215 million consequential to rise in profit before tax. Expense for income tax declined from Rs1,046 million to Rs904 million. As a percentage of net profit before tax, tax expense declined from 42 percent in 2016 to 31 percent in 2017, mostly because of super tax of Rs277 million was offered during 2016 as against to Rs145 million in 2017.
AUTOMOTIVE DEVELOPMENT POLICY (ADP)
The Government of Pakistan has proclaimed ‘Automotive Development Policy (ADP)’ during March 2016 applicable over a medium-term horizon of 2016-2021. ADP envisages development plan for auto industry to facilitate higher volumes, attract investment and ensure enhanced competition.
Objective of policy is to create balance between industrial growth and tariffs to ensure sustainability for all stakeholders. Existing Original Equipment Manufacturers (OEMs) in Pakistan were looking for new investment opportunities and expecting incentives at par with potential new entrants. However, no incentive given to existing OEMs for investment in new plants/models.
The company understands that lack of incentive to existing OEMs would affect the desired objective of ADP.
The experts of Pak Suzuki strongly appeals the government of Pakistan to revise the ADP and incorporate the incentives at par with potential new entrants to existing OEMs in ADP.