PAK SUZUKI MOTOR COMPANY LTD.

S.KAMAL HAYDER KAZMI,
(feedback@pgeconomist.com)
Research Analyst
, PAGE
Nov 28 - Dec 4, 2011

Pak Suzuki Motor Company Limited is pioneer in automobile business having the most modern and the largest manufacturing facilities in Pakistan with an annual production capacity of 150,000 vehicles including cars, small vans, pickups, cargo vans, and motorcycle. Pak Suzuki holds more than 50 per cent market share.

Pak Suzuki was formed as a joint venture between Pakistan Automobile Corporation and Suzuki Motor Corporation (SMC), Japan.

The company was incorporated as a public limited company in August 1983 and started commercial operations in January 1984. The initial share holding of SMC was 12.5 per cent, which was gradually increased to 73.09 per cent. Pak Suzuki increased its market share to 56 per cent in overall sales of cars and light commercial vehicles.

The company increased its production volume from 57,917 units to 66,862 units per annum to meet rising demand. The level of production represented 59 per cent capacity utilization. The organized market for motorcycles and three wheelers is also showing improvement. The overall demand rose 16 per cent.

Pak Suzuki boasts of the largest dealer's network offering 3S facilities nationwide.

Caring for the environment, the European-inspired exterior gives the Swift, a recently launched model, a distinctive look. The spirited engine is made for an exhilarating drive.

Similarly, Alto/ Mehran have bright, roomy, and comfortable cabins, which keep body relaxed with strong and lighter body with smooth drive due to reduction of unpleasant noise harshness and vibration. Its small turning radius and compact body makes parking a breeze.

The Suzuki Liana, available in 1300 cc manual transmission, is entirely different car. Its style, dimension and comfort inspire customers to see everyday as an open door to a new age.

Pak Suzuki was pioneer in introduction of factory fitted CNG vehicles. Pak Suzuki is also exporting Suzuki Ravi pickup, Liana and components to Bangladesh and Europe thus earning precious foreign exchange for the country.

In Pakistan, motorization level is eight cars per thousand persons as compared to 12 in India, 21 in Indonesia and 30 in Egypt.

The overall economic indicators of the country are improving.

Auto industry is now on the path to recovery after two consecutive years of market recession.

During January -September 2011, 667,687 units were sold against 576,357 units in the same period of last year. Pak Suzuki sold 16,063 units during the period against 14,463 units.

The sales volume of Pak Suzuki improved 17 per cent from 58,138 units in September 2010 to 68,036 units in September 2011.

The company earned net profit of Rs671.555 million in nine months as compared to Rs388.017 million in the same period of last year.

Net sales revenues increased 22 per cent (Rs7.046 billion) from Rs31.502 billion (September 2010) to Rs38.548 billion (September 2011) mainly due to higher volume and product mix.

Gross profit margin improved from 3.1 per cent to 3.78 per cent and in absolute terms by Rs473.337 million from Rs985.158 million to Rs1458.495 million.

The improvement was attributable to increase in volume. Distribution expenses increased from Rs159.386 million to Rs187.540 million but as a percentage of sales remained at 0.5 per cent.

Administration expenses climbed from Rs473.280 million to Rs534.142 million but as a percentage of sales marginally decreased from 1.5 per cent to 1.4 per cent. Other operating income increased from Rs442.376 million to Rs464.328 million. Net exchange gain was Rs42.881 million in contrast to net exchange loss previously. Financial cost decreased from Rs19.533 million to Rs13.162 million.

Flooding, Japan earthquake, and poor law and order situation exerted pressures on production and supplies. However, auto industry posted growth in sales mainly due to deferred buying by the customers who took advantage of reduction in GST and SED.

FUTURE OUTLOOK

Just like other local assemblers, Pak Suzuki is also against relaxation in pipeline for the import of used cars. Commercial imports and depreciation of Pak rupee against Japanese Yen pose threats to profitability of the company.

FINANCIAL PERFORMANCE (RS. IN '000)

INDICATORS JANUARY TO SEPTEMBER
2011 2010
Turnover 38,548,674 31,502,041
Cost of sales 37,090,179 30,516,883
Gross profit 1,458,495 985,158
Distribution Costs 187,540 159,386
Profit before tax 1,100,073 721,260
Net Profit 671,555 388,017
EPS (Rs) 8.16 4.71


BALANCE SHEET (RS. IN '000)

INDICATORS UNAUDITED
SEPTEMBER 30, 2011
AUDITED
DECEMBER 31, 2010
Current Liabilities 12,065,005 4,752,449
Current Assets 22,555,774 14,313,132
Fixed assets 4,627,949 4,937,232