Pak Suzuki Motor Company (PSMC) has declared a huge loss of Rs6.3 billion for the fiscal year ending December 31, 2022, with outstanding foreign liabilities of $184 million.
"The firm has outstanding foreign liabilities equivalent to $184 million at year end December 31, 2022, which grew to comparable $218 million subsequent to the year end," according to a notice issued to the Pakistan Stock Exchange (PSX) on Monday.
Tahir Abbas, Head of Research at Arif Habib Limited (AHL), told The Express Tribune, "These are dollar-denominated liabilities that keep accumulating as the dollar appreciates against the rupee."
In only one year, the rupee has fallen by roughly 65% against the dollar, from around Rs175 to around Rs280 to the dollar. "Business acquire their raw material from foreign nations in dollars so they must pay back in dollars. Yet, due to the country's condition, the company's obligations accumulated," added Abbas.
"Up to December 31, 2022, the company incurred an exchange loss of Rs3.55 billion on foreign currency transactions and balances," Pak Suzuki explained, adding, "After the year end, the rupee to dollar parity has further deteriorated, resulting in a massive unrealised loss of Rs9 billion (approximately) - which may impact the company's equity in 2023."
"If the foreign currency liability is not paid owing to limitations imposed by the State Bank of Pakistan (SBP), the company's exchange loss would increase, negatively impacting the company's equity in the fiscal year 2023," the statement continued.
According to a Topline Research analysis, the firm lost Rs3.8 billion in the fourth quarter of 2022, compared to a profit of Rs489 million in the same time the previous year. The company's loss per share (LPS) was Rs46.5 in the fourth quarter 2022, compared to an EPS of Rs5.9, bringing the full-year loss for 2022 to Rs6.3 billion, or an LPS of Rs77 per share."If the foreign currency liability is not paid due to State Bank of Pakistan (SBP) constraints, the company's exchange loss would escalate, significantly hurting the company's equity in fiscal year 2023," the statement stated.
According to Topline Research, the company lost Rs3.8 billion in the fourth quarter of 2022, compared to a profit of Rs489 million the previous year at the same time. In the fourth quarter of 2022, the company's loss per share (LPS) was Rs46.5, compared to an EPS of Rs5.9, bringing the full-year loss for 2022 to Rs6.3 billion, or an LPS of Rs77 per share."The results fell short of industry expectations due to higher-than-expected finance expenses," stated Sunny Kumar, an Analyst at Topline Research, who was backed up by Insight Research.
"Finance expenses, which include currency loss, late delivery markup, and demurrage and detention penalties, increased 14% year on year (YoY) and 4% quarter on quarter (QoQ) to Rs5.0 billion in the fourth quarter 2022 (4Q2022) and 16% YoY to Rs11.6 billion in 2022," Kumar added.
Gross margins for 4Q2022 were 9.8% higher than the 5.2% recorded in the same period previous year, and also higher than the 4.1% reported for the first nine months of 2022 (9M2022). According to Insight Research, gross margins were likely higher due to increased automobile pricing, cheaper freight charges, and major cost-cutting initiatives.
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