Suzuki records records Rs2.4bn loss in Q3CY22

The company saw a 54pc reduction in sales revenue to increase annual loss to Rs2.5bn 

LAHORE: Pak Suzuki Motor Company (PSMC) released its nine month financials for the period ending September 30 on Wednesday. According to the release, the company ended the third quarter of 2022 with a loss of Rs2.48 billion. This is a 461.91 per cent decrease on its Rs 440 million in the previous quarter. Its cumulative loss for the year now stands at Rs2.5 billion. 

The most notable quarter-on-quarter (QoQ) change for Suzuki was a 54 per cent decrease in its sales revenue. This can be attributed to the 47.8 per cent decrease in sales that it saw across its entire product portfolio based on the figures released by the Pakistan Automotive Manufacturers Association (PAMA).

Suzuki was able to increase its gross profit margin (GPM) to 5.24 QoQ from 4.41 per cent despite the reduction in sales volume. There are two likely reasons for the increase in the GPM. Firstly, Suzuki’s entire portfolio was on average 17.4% more expensive in Q3CY22 in comparison to Q2CY22. Secondly, Suzuki’s motorcycle division accounted for 38 per cent of its total sales in Q3CY22, in comparison to its 20 per cent contribution in the previous quarter. Suzuki’s motorcycle division is exclusively geared towards the upmarket category, and therefore allows for it to earn a greater profit margin per unit sold.  

The ramifications of the increase in the interest by the State Bank of Pakistan (SBP) are also visible in the changes to Suzuki’s other income and its cost of finances. Suzuki’s cost of finance and other income rose by 492 per cent and 2 per cent respectively. The increase is likely a result of the increase in the interest rate, however, it is likely that Suzuki may have also engaged in additional lending to finance expansion or other initiatives due to the increase in its cost of financing relative to its other operational costs. Debt financed expansion seems unlikely due to the economic climate and the cost of financing, however, it cannot be ruled out until Suzuki releases its more detailed statements for Q3CY22 in the coming weeks.

The absence of the Super Tax is also evident, as Suzuki’s effective tax rate has reduced from last quarter’s 68 per cent to 28 per cent this quarter. This is in line with its first quarter rate of 29 per cent.  

Suzuki outlook this (fourth) quarter, looks similarly bleak. This is on account of the State Bank of Pakistan’s (SBP) increased oversight of completely-knocked-down (CKD) kits, its periodic non-productive days over the summer, and finally the downturn across the entire automotive industry. Suzuki may benefit from the inflationary pressure on customers as it may redirect spending away from its competitors’ expensive offerings to its more affordable portfolio. 

 

 

 

Daniyal Ahmad
Daniyal Ahmad
The author is a member of the staff, and covers the automobile, energy and advertising insdusties as a sector analyst. He can be reached at [email protected]

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