Corporate Briefing: PSMC holds no plans for expansion due to current situation

June 17, 2020 (MLN): Pak Suzuki Motor Company Limited (PSMC) held its Corporate Briefing on June 17, 2020, to discuss the recent financial performance as well as future prospects and outlook of the company.

To recall, the company had incurred losses amounting to nearly Rs. 941 million (LPS: Rs. 11) for the quarter ended March 30, 2020, i.e. 4% lower than the losses of the same period last year.

On the other hand, the total losses reported during the year ended 2019 amounted to Rs. 2.9 billion, as compared to the net profits of Rs. 1.2 billion reported in the previous year owing to the decline in demand, which in turn was a result of higher prices and economic slowdown.

PSMC sold 113,270 units during the year 2019, which is around 19% lower than the sales made in the previous year. Moreover, the company did not produce any cars for the entire month of May, as it continued to keep its plant shut despite getting approval from the provincial government to resume operations.

According to a report by Darson Securities, the management of the company said that the decline in customer advances, along with excess inventory, resulted in an increase in the short-term borrowings which in turn raised the finance cost for the year.

Speaking about the hike in the prices of some of the variants, the management informed that the depreciation in the local currency against the Japanese Yen and US Dollar had resulted in an increase in the cost of production, which in turn harmed the gross margins. Thus, the company was compelled to negate this negative effect by raising the prices.

The management also discussed how the imposition of additional customs duty in the range of 2-7% on import of raw materials had added to its overall cost of production, and that the government had not proposed to remove these custom duties in its latest budget.

With regard to future prospects, the management stated that it does not plan on expanding the operations owing to the economic slowdown in the country, along with the uncertainty created by the spread of COVID-19.

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