Pak Suzuki Profit Loss – Depiction of Irrational Govt Policies

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Pak Suzuki Motor Company (PAMC) and other car assemblers have also recorded losses for multiple reasons. As per a statement, Suzuki accomplished an operating profit of Rs. 5.4 billion compared to SPLY of Rs. 2.6 billion (108% higher). Despite a strong operational performance, the company incurred a net loss for the year of Rs. 6.3 billion compared to a 2.7 billion profit last year.

The Primary Reasons

So, what translated an Rs. 5.4 billion operating profit into a net loss of Rs. 6.3 billion? As per the company, these are the reasons behind this fall: 

  • The first one is the exchange loss of Rs. 3.6 billion, mainly due to the non-availability of foreign currency for the relinquishment of foreign liabilities on a timely basis.
  • Then comes Demurrage charges (charges the merchant pays for the use of the container within the terminal beyond the free time period) of Rs. .3.6 billion paid for stuck-up consignments at the port. 
  • Then there was a markup on advance from the customers of Rs. 3.8 billion due to delays in deliveries on account of disruptions in supply chains. 
  • Lastly, another important aspect that is causing a going concern issue to Pak Suzuki is the outstanding foreign liability of USD 218 million, which is not paid due to restrictions by the State Bank. With the rupee devaluation of 25% since December 31, 2022, the company has further incurred a loss of over Rs. 10 billion during Q1 2023. This is also visible in the quarterly loss announced by Suzuki on March 31, 2023, of Rs. 13 billion.

The company highlighted that it has adversely impacted by Rs. 11 billion due to import restrictions, extreme Foreign Exchange instability, State Bank of Pakistan’s (SBP) restrictions, delay in LC clearance, and demurrage charges.

Sharing more details, the car assembler said it started with a positive opening cash balance of Rs. 23.2 billion and bled cash of Rs. 19.5 billion during the year, closing the year at a negative cash balance of Rs. 3.7 billion. 

What do you think about the explanation of Pak Suzuki? Please share your thoughts in the comments section. 

 

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1 Comment
  1. Moose says

    pak suzuki explanation is BS in my opinion. Hasn’t the government come out with policies in the last 30 years to make all automakers start production in Pakistan instead of importing everything? but due to lobbying and corruption these policies where not enforced or revoked. Isn’t this shooting oneself in the foot? If the automakers and other industries and started local production of engines, transmissions, etc. they wouldn’t have been in the mercy of the dollar or import ban, dollar fluctuation, etc. Yes there would be some influence but not the extend of what we are seeing these days. To me it just seems like the story of the boy crying wolf. They blame everyone else but at the end they have only themselves to blame. Hopefully due to the economic situation here it might bring some sense to the automakers, other industries, and our government to think about the country and to come out with policies that will help the country and industries in Pakistan so they can be self efficient instead of relying on imports and be at the mercy of the all might dollar.

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