PSMC declares a loss of Rs 980m after Mehran discontinuation

KARACHI: Pak Suzuki Motor Company (PSMC) declared a net loss Rs 980 million due to discontinuation of legendary hatchback Mehran and rupee depreciation in the first quarter of fiscal year.

According to analysis, company’s first quarter of fiscal year started on January 1 and ended on March 3.

Pak Suzuki secured Rs 903 million net profit in the first quarter of 2018.

According to reports, the loss was announced by the company in its financial results sent to the Pakistan Stock Exchange (PSX).

In simple terms, Pak Suzuki had earning per share of Rs 10.99 during the first quarter of 2018 while it had a loss per share of Rs 11.92 during the same period in 2019. Mehran’s discontinuation has been a major reason behind the losses. Its declining sales have been argued by various quarters.

In March 2019 PAMA report, it was discussed that Suzuki Mehran went down 24% in the first nine months of the current fiscal year.

The demand for Suzuki Wagon R has soared as 2,982 units were sold in March 2019 as compared to 2,419 units in February 2019 (18.8% increase).

The change of trends has taken a hit on Pak Suzuki. Moreover, the value of rupee decreased by up to 34 percent as compared to US dollar rate since December 2017 till now is also a major factor.

Now, the company is replacing Mehran with Suzuki Alto 660cc and expects more sales after its launch in June 2019.

According to Brokerage Topline Research, the PSMC incurred the loss because of the “depletion in gross profit margins by 5 percentage points year-on-year to 3% (a 25-quarter low) amidst rupee devaluation, which considerably increased the company’s cost of doing business.”

This decline in profits also had an impact on consumers.

An expert, while talking to a local news outlet, shared his insights on the matter by claiming that this is the biggest loss in eight years for the company.

During this period, Pak Suzuki’s sales fell but the revenues increased to Rs34.5 billion in the first three months of 2019 against Rs31.5 billion during 2018.