KARACHI, Nov 7: On Wednesday, Pak Suzuki Motor Company Limited announced the financial figures for the year ended June 30, 2001, posting a huge after tax profit of Rs87 million, replacing the after tax loss of Rs26.6 million the previous year.

The Board of Directors which met at Hamamatsu, Japan on Wednesday, Nov 7, also proposed to pay cash dividend at 8 per cent. The dividend is to be resumed after a blank 2000. The company had disbursed cash dividends for all four years from 1996 through 1999; the last cash dividend for 1999 being at 22.5 per cent. The Annual General Meeting (AGM) has been called on Wednesday, December 5, 2001 at Karachi.

The stock market greeted the Pak Suzuki results and dividend on Wednesday with Rs1.70 increase in the value of the Automobile producer’s stock, which closed at Rs10, from the starting price of Rs8.30. Some 86,000 shares came up for trading. The share in the company had touched a 10-year high at Rs133 in 1992 while it had plunged to its record low of Rs7.50 earlier this year.

The company had raised the number of outstanding shares from 12.28 million in 1992 to 49.13 million currently, through two rights at 100 per cent each in 1992 and 1994. There have been no bonus issues by the company, in any of the recent years.

Pak Suzuki Motor Company was formed as a joint venture between Suzuki Motor Corporation, Japan (SMC) and Pakistan Automobile Corporation (PACO), following PACO’s take over of Awami Autos Limited in 1983. Later in 1992, the company was “privatized” with SMC raising its equity to 40 per cent from 25 per cent. SMC kept accumulating stock to increase its stake to 67.2 per cent and in 1996 purchased the PACO’s shareholding to own 72.8 per cent of the company.

Net sales in terms of value increased by 15.8 per cent for the year ended June 2001 to Rs7.976 billion, from the year ago sales at Rs6.889 billion. Cost of sales rose by 15.5 per cent to Rs7.599 billion, from Rs6.579 billion. Gross profit was up by 21.6 per cent to Rs376.7 million, from Rs310.2 million. Gross margin improved slightly to 4.7 per cent, from 4.5 per cent.

The financial figures on Wednesday were not accompanied by the directors’ report, so it is difficult to determine if the sales spurt had more to do with larger number of vehicles sold or price increases, or both. Also, it would be instructive to analyse the various components of the cost of sales.

Operating profit jumped by 133 per cent to Rs175.0 million, from Rs75.5 million and the operating margin almost doubled to 2.2 per cent of sales, from 1.1 per cent last year.

Selling and administrative expenses could be reduced by 14 per cent to Rs201.7 million, from Rs234.8 million, which also went to contribute to a positive bottom line. It would have been appropriate to show selling and administrative expenses separately. On the other side, “Other income”, suffered 62 per cent fall to Rs27.7 million, from Rs74.2 million. The items that make up the ‘other income’ would have to be studied to understand the reason for the steep decline.

Last year the company had carried accumulated losses of Rs25.2 million on the balance sheet. With the profitability for the latest year, the company has been able to transfer Rs47 million to the general reserves, besides recommending payout of Rs39.3 million in cash dividend to the shareholders.

The major factor that seems to have allowed the company to return to profitability during the year under review was the 47 per cent decrease in financial & other charges. These stood at Rs78.1 million, compared with Rs147.7 million last year. Costly outside debts appear to have been trimmed. Was it due to improvement in cash flow or as some stock analysts believe, did the Parent inject more liquidity during the year? Many of the answers would be found in the Chairman’s review and the directors’ report to the shareholders. Those that remain could be put to the Board by the shareholders when they meet at the AGM on December 5.