Karachi August 31, 2021: Pak Suzuki Motors Limited (PSMC) expects that new auto policy will be industry-friendly by offering incentives to OEMs and vendors.
PSMC appreciate the incentives announced in Federal Budget 2021-22 for auto industry. Major incentives were allowed to vehicles up to 1000cc which includes removal of Federal Excise Duty (FED), reduction in sales tax rate to 12.5% and abolishment of Additional Customs Duty (ACD). For higher segment vehicles, FED reduced by 2.5% and ACD reduced to 2%. Consequently, OEMs passed on above incentives to customers by reducing the prices. Another relief is reduction in minimum income tax from 1.5% to 1.25% of turnover to support low margin companies. Conducive macro environment coupled with single-digit interest rate, reduction in prices of vehicles and influx of new models will contribute for robust demand of vehicles.
Long term consistent policies are vital for growth of auto industry. Current auto policy was applicable for the period 2016 to 2021 and new auto policy is expected to be announced in near future. It is expected that new auto policy will be industry-friendly by offering incentives to OEMs and vendors. Uncertainty still prevails due to fourth wave of COVID-19. Yet the Company is endeavoring to improve sales, profitability and diversity in its operations by upgrading the existing products and offers quality products to customers at competitive prices through an efficient network of authorized dealers.
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The Company earned net pro¬t of Rs 1,197 million compared to net loss of Rs 2,463 million in same period of last year. Net sales revenues increased by Rs 38,631 million from Rs 27,479 million (Jan-Jun 2020) to Rs 66,110 million (Jan- Jun 2021). Sales revenue increased by 141% in current period due to recovery in sales volume. Gross pro¬t increased in absolute terms by Rs 3,994 million from gross loss of Rs 40 million (Jan-Jun 2020) to gross pro¬t of Rs 3,955 million (Jan-Jun 2021). Gross pro¬t margins as a percentage of net sales improved from negative margin of 0.14% to positive margin of 6%. Further, improvement in liquidity position of the Company contributed to reduction in ¬nancial charges and increase in interest income. Financial charges reduced by Rs. 1,649 million from Rs. 1,941 million in 2020 to Rs. 292 million in 2021.
However, the stock price drop 7.5 percent on result announcement.
Recovery in auto sales volumes was witnessed from 4th quarter of 2020. Overall economic condition of country showed signs of recovery. Main factors contributing to recovery of automobile sector were increase in car ¬financing volumes driven by low interest rates, increase in disposable income in the hand of customers due to increase in foreign remittances and improved agricultural income.
During the period (January – June 2021), sales volume of auto industry for cars and light commercial vehicles was recorded at 94,059 units compared to 44,134 units in corresponding period of last year, registering an improvement of 113%. Sales volume of your Company during the half year January - June 2021 increased by 135% from 21,269 units to 50,131 units, outperforming industry trend by more than 20%. The total sales volume of the Company represented 53% market of cars and light commercial vehicles within PAMA member companies. Your Company adjusted its production according to demand and achieved production volume of 54,538 units. Capacity utilization remained at 72%.
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During the period under review, the organized market (PAMA member companies) for motorcycles and three wheelers increased from 570,185 units to 953,061 units. Increase of 382,876 units represents 67% improvement in sales volume over same period of last year. Your Company achieved sales volume of 14,333 units as compared to sales volume of 5,937 units in corresponding period of last year, registering an increase of 120%.