KARACHI: Despite the higher profits of Rs 488 million in April-June 2016, Pak Suzuki Motor Company (PSMC) Monday increased prices of all its car models by 3 per cent, minimum (Rs 20,000 to 103,000)per unit, according to market sources.

Price of Wagon R VXR 1000cc Euro II has been increased by 11.36 per cent or Rs 103,000 from Rs 906,000 to Rs 1.009 million, while the company has increased the prices of each model of Mehran Rs 20,000, Suzuki Swift Rs 30,000, Cultus Rs 80,000 and Bolan Van Rs 25,000.

It is also learnt that Auto manufacturers and Assemblers are not delivering their cars to the customers as per new auto policy from July 1, 2016 and has raised several questioned regarding the new auto policy through separate letter to the ministry of industries. On the other side, the Engineering Development Board (EDB) has asked the federal government to forcefully implement the new auto policy in Pakistan as the assemblers and manufacturers using delaying tactics.

“This price increase will help PSMC to maintain its margins, which had come under pressure due to increasing Yen value in the local and international market,” said analysts. Gross margins have deflated by due to 6 per cent QoQ appreciation of JPY against US dollar and 13 per cent QoQ higher CRC steel prices, the analysts claimed.

Earlier this year, price of one of its models, Suzuki Wagon R, was increased by 2 per cent, he added. Due to Yen appreciation, the company’s margins in the first half 2016 were 10 per cent compared to 14 per cent during 2015.

Further, the analysts expect PSMC will likely increase prices by 2 per cent in addition to the increase announced today during the remainder of the year. The analysts forecast the company to maintain margins of around 10-11 per cent during 2nd half 2016.

On last Thursday, PSMC announced its profits of Rs 488 million declining by 5 per cent in April-June 2016 because of higher tax expenses and super tax. The company shows its earnings per share of Rs 5.9.

Because of the Super Tax and other taxes, PSMC reported tax expense of Rs 600 million, which resulted in effective tax rate of 55 per cent.

The company’s sales fell 7 per cent year-on-year to Rs 19 billion in 2nd quarter 2016. This decline was mainly due to drop in volumetric sales post culmination of Apna Rozgar Taxi Scheme of Punjab government, which ended on March 2016.

Company’s sales in the outgoing quarter were 26,011 units, a decline of 19 per cent YoY (down 11 per cent YoY to 56,192 units in first half 2016). Excluding Taxi units (Ravi and Bolan), sales were robust as they increased 23 per cent YoY to 16,911 units in 2nd quarter 2016 (17 per cent YoY to 34,864 units in first half 2016).

On QoQ basis, revenue fell 5 per cent due to 13.8 per cent decline in volumes. Gross margins contracted 1.7ppts from 11 per cent in first quarter 2016.

On the other hand, other income increased by 38 per cent to Rs 590 million. Though, 42 per cent effective tax rate (due to 3 per cent super tax) has restricted the bottom-line to Rs 1.4bn (EPS Rs 17.4), down 41 per cent.