Pak Suzuki Profit Loss – Depiction of Irrational Govt Policies
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.