LAHORE: Baluchistan Wheels Limited (BWHL) notified the Pakistan Stock Exchange that it will be observing non-production days (NDPs) from April 7 till after the Eid holidays. The decision has been attributed to the reduced orders from its clientele across the various original equipment manufacturers (OEMS).Â
Originally established for manufacturing steel wheels for automobiles, Baluchistan Wheels now produces a diverse range of wheels for passenger cars, commercial vehicles, agricultural tractors, and 4×4 vehicles. The company caters to both domestic and international clientele. However, the former constitutes the bulk of the company’s demand as this is not the first time it has made a decision to observe NPDs over the past six months due to demand destruction in the local automotive market. The company previously observed NPDs from December 12 to January 6.Â
The company’s woes this financial year amidst the automotive downturnÂ
The company’s financial report for Q2FY23 also reveals the extent of its worries due to the downturn in the local automotive industry. The financial report for the period from July to December 2022 revealed a sharp decline in the company’s revenue, gross profit, and net profit. Consolidated revenue for the period plummeted by 32% in comparison to the same period last year, dropping from Rs. 1,304 million to Rs. 885 million. Sales of car wheels saw a considerable decrease of 25% from Rs. 662 million to Rs. 498 million, sales of Truck/Bus wheels declined by 2% from Rs. 109 million to Rs. 107 million, and sales of Tractor wheels witnessed a substantial drop of 55% from Rs. 502 million to Rs. 225 million. These declines in sales across all segments contributed to the overall decrease in revenue.
Gross Profit tumbled by 44%, from Rs. 274.412 million to Rs. 154.868 million, and the profit after taxation slumped by 46%, from Rs. 108.461 million to Rs. 58.047 million. The primary reason for the decline in gross profit and net profit during the period was the depressed demand for wheels in all segments. This was due to plant shutdowns of various auto assemblers owing to non-availability of raw materials caused by restrictions on opening Letters of Credit (LCs).Â
No end to the pain on the horizonÂ
The Pakistan Automotive Manufacturers Association recently released sales data for the four-wheel industry in February, which showed that 122,067 units were sold in the first eight months of FY23. This represents a significant 44% year-on-year decrease from the 218,589 units sold during the same period last year.
Given the current economic climate, the outlook for March and the coming months does not look promising in terms of sales. If a recovery does not take place soon, Baluchistan Wheels may face even more non-performing debts (NPDs).
