BALOCHISTAN WHEELS LIMITED - BWHL

MARIAM NASIR
Manager Research
July 09 - 15, 2007

Balochistan Wheels Limited was incorporated on June 16, 1980 with technical collaboration with GKN Sankey Limited UK. Main business of the company is to manufacturing and marketing automotive wheel rims for trucks, buses tractors, cars, and mini commercial vehicles. The company is listed in Karachi Stock Exchange. Balochistan Wheels Limited caters to 90% of local market and also exports to Europe and South-East Asian countries. BWL, the only original equipment suppliers in Pakistan has the privilege of being associated with world renowned original equipment manufacturers (OEMs).

OPERATIONAL & FINANCIAL PERFORMANCE IN 9M/FY07

Sales during the period stood at R.822 million as compared to Rs.835 million in FY06 which is 1.5% less than corresponding previous period. Due to decline in sales of certain segments of auto industry, affect company's sales line reported rationale behind this slight drop in sales is the influx of reconditioned and second hand automobiles in the market. The gross profit is Rs.205 million as compared to Rs.199 million in the corresponding previous period, an increase of 3%. By the end of 9M/FY07 company's profitability has been declined by 5.7% and stood at Rs.87 million (EPS: Rs.6.58) as compared to Rs.93 million (EPS: Rs.6.97) in the corresponding previous period.

While the performance in third quarter of FY07 was that the sale of car wheels decline by 2.2% from Rs.571 million to 584 million compared to preceding corresponding period. Similarly, the Truck / Bus wheels sale is Rs.88 million as compared to Rs.132 million. Significant improvement in Tractor wheels sales to 34% of Rs.122 million from Rs.91 million in the preceding corresponding period, whilst, in FY06 has moved to Rs. 311 million from Rs. 265 million i.e. 17% higher than in FY05. Similarly, company's export sale was Rs.13 million as compared to Rs.5 million in the preceding corresponding period, in contrast with export sales of Rs. 8 million in FY06 compared to Rs. 10 million in FY05 has notably jumped to Rs. 13 million.

RS. IN '000

9M/FY06

9M/FY07

CHANGE

Turnover -Net

834,789

822,045

-1.5%

Cost of Sales

635,788

617,191

-2.9%

Gross Profit

199,001

204,854

2.9%

Distribution Cost

9,135

13,153

44.0%

Administrative Expense

28,224

30,415

7.8%

Operating Profit

161,642

161,286

-0.2%

Other Income

5,704

5,071

-11.1%

Finance Cost

4,930

10,003

102.9%

Other Charges

9,217

10,318

11.9%

Profit Before Taxation

153,199

146,036

-4.7%

Taxation

60,211

58,318

-3.1%

Net Profit

92,988

87,718

-5.7%

Earning Per Share (Rs.)

6.97

6.58

-5.7%

The company has a healthy dividend paying out policy. Over the year the dividend has ranged between 15-25%. In the year 2005 company paid out Rs1.5 cash dividend and 15% bonus whereas in 2006 the company paid out cash dividend of Rs2.5.

INDUSTRY AUTO SALES IN 11M/FY07

Car production and sales during the 11M/FY07 period rose by 1.1% and 4.8% to 145,442 and 146,784 units respectively. Tractor production and sales during the period under review rose by 12.1% and 12.3% to 49,047 and 48,707 units respectively. Unit sales by Pak Suzuki and Indus Motors rose by 23% and 19% to 108,254 units and 43,985 units respectively. On the flip side the sales by other two listed car assemblers declined by 36% to 26,509 units previously being 41,400 units. Pak Suzuki's overall market share rose by 7.7pps on comparative basis to 60.6% while the same for Indus Motor was up by 2.4pps to 24.6%.

FUTURE SCENARIO

A sudden and consistent gush in demand of cars, trucks, buses and tractors seems to have settled down. The new light duty rim line and allied machinery have become operational with and encouraging results. Still company needs to go a long way in achieving the target of improved quality, meeting the additional requirements of assemblers, adding more products and increasing export of wheels, for which constant efforts are being made. However the growth in the automobile industry has subsided in the current year and the number of sale has declined. Apart from that budget outcome of 2.5% withholding tax is another negative outcome for the local car assemblers which will ultimately affect the company.