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Existing carmakers unlikely to win tax benefits - The Express Tribune
Existing carmakers unlikely to win tax benefits
ISLAMABAD:
The existing car assemblers may not get similar tax benefits that the government wants to offer to new investors for attracting a European brand after tax authorities have again opposed the move due to poor performance.
The resistance to give preferential treatment to the existing car assemblers grows as they are blamed for selling low-quality vehicles to consumers at high prices.
A meeting to discuss the tax incentives, which would be extended under the new automobile policy, was held on Tuesday with Finance and Revenue Minister Ishaq Dar in the chair. Board of Investment Chairman Miftah Ismail and Federal Board of Revenue Chairman Nisar Muhammad also attended the meeting.
The definition of new investor and the duty structure came under discussion.
The Ministry of Industries has already forwarded a summary to the Economic Coordination Committee (ECC) after the Khawaja Asif committee ended its deliberations. However, the FBR opposed more incentives to the existing players.
Dar called the meeting of stakeholders to know about the FBR’s position amid reports that the existing investors may get almost similar incentives that the government wants to give to the new players.
“The purpose of introducing a European brand in Pakistan will be achieved,” said an official who attended the meeting. The government desires that Fiat, Volkswagen or Audi should establish its footprints in Pakistan, as the country has a huge market but the consumers are served only by the existing players for almost three decades.
Without getting preferential treatment, no new foreign manufacturer can establish its plant in Pakistan due to a strong network of the existing assemblers.
The Ministry of Industries and Production tabled a revised automotive development policy for approval of the ECC in the last meeting, but Dar deferred a decision until the next meeting.
The summary of automobile policy revealed that the government had again offered similar tax incentives to the existing assemblers in a deceptive manner.
During deliberations, the Khawaja Asif committee proposed to delete the Category C that offered the same tax benefits to the existing players.
The committee also agreed that definition of the Category A that offers incentives to the new manufacturers should be slightly amended and the word “new brand” should be added to make sure that the existing players did not get the tax benefits.
However, contrary to the understanding reached, the Ministry of Industry’s summary also offered tax concessions to the existing players. Its revised definition of Greenfield investment reads, “Greenfield is defined as the construction of new and independent automotive assembly and manufacturing facilities by an investor for the production of vehicles, not already being manufactured/assembled in Pakistan.”
It has now been decided that words “new make” will be inserted in the definition to deny tax benefits to the existing players. However, the words “new brand” and “new investor” are again missing.
FBR’s stance
Against the proposal of applying single tax rates to the localised and non-localised car parts, the FBR wants two separate rates for both the categories. It also opposes any additional benefit to the existing players.
The FBR did not agree to the proposal of reducing the tax rate to 25% for non-localised parts of completely knocked down (CKD) units from 32.5% and 35% for localised parts of CKD units from 50%. Instead, it has proposed a gradual reduction that will still be higher than the rates proposed by the Engineering Development Board.
For completely built units (CBUs), the tax rates are proposed to be kept unchanged.
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Pak Suzuki announces 207% increase in profit - The Express Tribune
Pak Suzuki announces 207% increase in profit
KARACHI:
Pak Suzuki Motor Company (PSMC), the country’s largest carmaker in terms of market share, on Tuesday announced a net profit of Rs5.8 billion or earnings per share (EPS) of Rs70.9 in the year ending on December 2015, up 207% compared to Rs1.9 billion or an EPS of Rs23.4 in the same period of last year, according to a company notice sent to the Pakistan Stock Exchange (PSX).
In the fourth quarter (Oct-Dec) of 2015 alone, the company posted a profit of Rs1.8 billion or an EPS of Rs21.7, up by a massive 479% from Rs311 million or an EPS of Rs3.8 in the same quarter last year.
The result was also accompanied by a final cash dividend of Rs15 per share.
The KSE-100 Index closed at 32,623, down 115 points on Tuesday, while the share price of Pak Suzuki ended at Rs431.33, down 3%.
“The result was below market consensus,” Topline Securities commented in its report.
During 2015, revenues of the company improved substantially by 58% year-on-year (YoY) while gross margins improved by 579 basis points (bps) to 13.6% from 7.8% during 2014. The company sold 133,660 units in 2015, up 72% YoY.
Revenue grew by 86% year-on-year to amount to Rs23.5 billion in the fourth quarter of fiscal year 2015-16 (4Q2015) as company sold 36,712 units in the fourth quarter (+97% YoY).
“We attribute this increase in volume to the Punjab taxi scheme launched in provincial budget of fiscal year 2015,” the report said. To recall, PSMC offered a discount to the Punjab government after it placed a huge order.
Gross profit improved substantially to Rs3.2 billion (+271% YoY) in 4Q2015 while gross margins rose by 677 bps to 13.6% year on year. This happened due to 22% YoY fall in international steel prices during the fourth quarter of 2015 and favourable exchange rate movement as the dollar and rupee appreciated against Japanese yen by 5.3% YoY and 2.4% YoY, respectively.
Other income grew by 348% YoY to Rs318 million in the fourth quarter of 2015 as the company earned interest on advances received from customers owing to strong car demand.
Distribution expenses surged to Rs445 million (+184% YoY) led by increased sales.
On quarter-on-quarter (QoQ) basis, revenue of the company posted an increase of 11% from Rs21.2 billion in third quarter of fiscal year 2015-16 (3Q2015) due to 8.7% QoQ volumetric growth.
However, gross margins declined by 229 bps from 15.9% in 3Q2015. “We attribute this decline to 1% QoQ appreciation of yen against the dollar and higher sales of taxi units (at discounted price) during the quarter,” said the report.
