KARACHI: Despite higher sales revenue, Pak Suzuki Motor Company’s earnings plummeted 66% to Rs1.3 billion in calendar year 2018 as a weaker rupee eroded margins of the automaker, according to a company notice sent to the Pakistan Stock Exchange (PSX) on Monday.
The company had reported a profit of Rs3.8 billion in the previous year.
Earnings per share (EPS) stood at Rs15.77 in 2018 compared with Rs46.49 in 2017.
The company also announced a cash dividend of Rs3.16 per share for the year ended December 31, 2018.
Revenues jumped 18% to Rs119.9 billion in 2018 from Rs101.8 billion in the previous year. Cost of sales also increased 22% to Rs112.8 billion. Gross profitability of the company decreased 27% from Rs9.7 billion in 2017 to Rs7.04 billion in 2018.
“The automaker’s profit margins plunged from 9.5% in 2017 to 5.9% in 2018,” said Ahmed Lakhani, senior analyst at JS Global Capital. “These margins contracted owing to steep rupee depreciation.”
Elaborating, he said, “auto parts are hit by rupee depreciation whether they are imported or produced in Pakistan. Local producers of auto parts also import raw material, for instance steel, so they also get affected by the devaluation.”
Finance cost of Pak Suzuki Motor Company surged from just Rs68 million in 2017 to Rs362.5 million in 2018. The company also made a huge investment in the upcoming Suzuki Alto 660cc as it imported machinery for the model.
“In the past one decade, the company’s working capital has been at the lowest levels and for the first time it has to go for bank financing,” he said. “Normally, it will go for equity financing.” Profit from operations plunged 63% to Rs2.08 billion in 2018 against Rs5.63 billion in 2017.
“Earnings are below expectations due to significantly higher margin attrition,” said Syed Daniyal Adil, an analyst at Topline Securities. “This is despite a tax reversal during the outgoing quarter.”
The company’s stock closed at Rs257.96, down Rs13.57, with trading in 284,900 shares on Monday. Overall, the KSE-100 index closed at 38,128.66 points, down 403.21 points.
Published in The Express Tribune, March 26th, 2019.