KARACHI: Pak Suzuki Motor Company (PSMC) has declared a profit of Rs394 million in Q2FY18 despite price increases as well as the volumetric growth of 25.5 per cent year on year (YoY).
Topline Securities’ Analyst Syed Daniyal Adil told Pakistan Today, “The earnings are below expectations as the margin compression was higher than anticipated.”
The company reported its Q2FY18 earnings wherein the company posted Profit-After-Tax (PAT) of Rs394 million with earnings per share of (EPS) Rs4.78, down 43 per cent YoY.
Net sales grew by 35 per cent YoY to Rs30.1 billion as well as the volumetric growth of 25.5 per cent YoY.
Volume wise, Wagon-R led the growth chart, rising by 66 per cent YoY, followed by Swift (up 37 per cent YoY), and Ravi (up by 33 per cent YoY). Volumetric growth remained strong, reaching 37,621 units cumulatively in Q2FY18, as demand for smaller passenger cars from ride-hailing services continued.
Cost of sales grew 39 per cent YoY, outpacing the robust revenue growth, leading to significant gross margin erosion. Gross profit fell by 9 per cent YoY, pulling down gross margin by 2.7 percentage points YoY to 5.7 per cent in Q2FY18. Margin compression can be attributed to higher raw material costs (Steel prices up by 22 per cent YoY) as well as Pak-Rupee depreciation, down by ~15 per cent from December 2017 to June 2018, combined with the inability of the company to effectively pass over the impact to customers.
Earnings were further dragged down due to 24 per cent YoY higher administrative cost as well as an effective tax rate of 46 per cent due to the incorporation of super-tax.
For the first half 2018, earning growth declined by 35 per cent YoY despite 22 per cent YoY volumetric growth, as gross margins fell due to aforesaid factors to 7.0 per cent in first half 2018 compared to 10.3 per cent in first half 2017.
Other income increased by 21 per cent QoQ to Rs213 million, the analyst said.
Effective taxation was recorded at 46 per cent in 2QCY18 (company recorded a super tax of 3 per cent on CY17 earnings) compared to 32 per cent in the same period last year.
