KARACHI: The profits of auto assembling sector plunged by 7.3 percent in first half of current financial year compared to corresponding period of last year.
The three major auto assemblers of the country (Indus Motor, Pak Suzuki & Honda Atlas) having 58 percent of the total auto sector market capitalisation and 93 percent of total cars and LCVs sales posted Rs 2.1 billion net profit in July-December period of this fiscal compared to Rs 2.3 billion in the same period of last year, a research report of Jahangir Siddiqui Global Capitals indicated here on Friday.
Statistics show that net sales of industry stood at Rs 47.8 billion in the period under review against Rs 49.6 billion in the previous year, depciting a negative growth of 3.8 percent. The decline in sales was a direct impact of tumbling volumetric sales which dropped by 2.9 percent during the said period to stand at 83,500 units (Cars + LCVs), report mentioned. In addition, gross margins went down 80 bps from 8.3 percent to 7.5 percent amid increasing steel prices and 1.6 percent appreciation in yen from first half of previous financial year to same period of this year. “This negatively impacted industry’s gross profits during this period, as cumulative gross profits saw a decline of a considerable 13.1 percent to land at Rs 3.6 billion”, analyst Bilal Hameed noted.
Other income, which constitutes around 25 percent of the profit before tax, also posted a decline of 11 percent in the period under review. This has been due to the declining cash balances of the companies and reduced deposit rates.
Companay wise performance showed that out of the three leading car assemblers, Indus Motor and Honda Atlas displayed positive growth in their profitability. Indus Motor increased its profit by 6.5 percent in the said period while Honda Atlas reduced its net loss of Rs 247 million in first half of last year to a loss of only Rs 20 million in same period of this fiscal year, translating into a massive growth of 91 percent.
On the contrary, volumetric sales of Indus Motor declined by 6 percent and that of Honda Atlas by 17 percent due to the political tensions in the country in fourth quarter of 2007. However, both the companies were able to increase their gross margins as they stood at 2.8 percent (-1.8 percetn in first half of financial year 2007) for Honda Atlas and 10.6 percent (10.3 percent in first half of financial year 2007) for Indus Motor – mainly due to favorable rupee yen parity in first quarter of this financial year.
Pak Suzuki, the largest auto assembler company in Pakistan, faced tough times during the period under review. The total volumetric sales (Cars + LCVs) for Pak Suzuki remained flat increasing by just 0.6 percent, but sales of cars which contribute 74 percent of their total sales declined by 5.3 percent. staff report