Pak Suzuki extends motorbike production shutdown

• Pak Suzuki extends motorbike plant shutdown till April 15.
• Automobile plant will also observe shutdown on April 7 and April 14.
• Firm cites inventory shortage caused by import curbs major reason.

KARACHI: Pak Suzuki Motor Company announced a 15-day extension to the longest motorbike plant shutdown to date.

The company, in a notice sent to the Pakistan Stock Exchange (PSX), announced that its motorcycle plant will remain closed till mid of April, citing an inventory shortage caused by import curbs in the country.

The company had already been observing non-production days for bikes since March 20, which it continued for another two weeks, weighing the woes of the industry. 

“The management of the company has decided to extend the shutdown period of its motorcycle plant till April 15, 2023,” the two-wheeler maker said.

The automobile plant would also observe shutdown on April 7 and April 14 due to a shortage of inventory level, it added. 

The company is the local assembler, manufacturer and marketer of Suzuki cars, pickups, vans, 4x4s and motorcycles as well as related spare parts. Meanwhile, the Suzuki brand itself is from Japan.

Pakistan is facing its worst economic crisis. On one hand, the country is standing with only $4.24 billion (as of March 24, 2023) reserves in its central bank, while it also struggles to win an International Monetary Fund (IMF) deal amid a lack of foreign inflows from other countries.

With alarmingly low foreign reserves and a shortage of US dollars, banks are reportedly denying the opening of letters of credit (LCs) for items which are not “essential”. 

The country’s economic challenges have hit the auto industry, dependent on imports, as many companies have been taking continuous production breaks, blaming inventory shortages.

Honda Atlas has also been observing non-production days for many months and the company’s plant is still shut till April 15. The company cited that the current economic situation of the country and commercial banks’ inability to facilitate the imports of the auto sector had forced it to cut production days.

Pak Suzuki reported a net loss of Rs6.336 billion in 2022, down from profits of Rs2.679 billion the previous year. The company skipped any payout for the said period. Loss per share came in at Rs77 per share in 2022, compared with earnings per share of Rs32.56 per share last year.

The revenue for Pak Suzuki for 2022 rose to Rs202.466 billion, compared with Rs160.082 billion a year earlier. However, the cost of sales also increased to Rs190.782 billion, from Rs151.911 billion in 2021. 

The company said its finance cost for the period had risen to Rs11.614 billion, compared with Rs737.041 million the previous year, which converted profits into losses.

“The company has outstanding foreign liabilities of equivalent to $184 million at the year-end of 2022, which increased to $218 million and the company incurred an exchange loss of Rs3.55 billion on foreign currency transactions and balances,” the company secretary of Pak Suzuki said. 

The rupee-dollar parity further deteriorated and resulted in a huge unrealised loss in 2022, which may impact the equity of the company in 2023, according to the company secretary.

In February, Pak Suzuki recorded a decline of 67% month-on-month and 92% year-on-year in its car sales, mainly for the aforementioned reasons.