%20and%20Dubai%20Waterfront%20(DWF)_large.jpg)
National carmaker’s revenue and profit up despite weak auto market
THE financial results delivered by Proton Holdings Bhd yesterday were a pleasant surprise yet somewhat of a rude shock.
The surprise was the manner in which profit and revenue grew amid a generally weaker environment for auto sales.
Backed by brisk demand for its three main models – Persona, Saga and Exora – which account for 86% of domestic sales, Proton smashed earnings expectations as it delivered on its strongest results in years.
The earnings of 14.9 sen during its second quarter was its best showing in six quarters and the second best since the final quarter of its 2006 financial year.
According to Malaysian Automotive Association data, Proton’s sales increased 9% in its second quarter compared with the previous corresponding period.
This at a time when industry volume was down about 3.5% against a year ago.
“We expect continued sales volume momentum and maintain our forecast for Proton’s sales volume to exceed the 150,000-mark for financial year 2010,’’ said UOBKayHian.
UOBKayHian in a note yesterday said it did not expect Perodua’s Alza, its MPV offering, to dent demand for Proton’s Exora.
The reason? The segment Proton is selling its MPV is less price sensitive and for those who count the ringgit and sen before buying a car, Proton had recently introduced a no-frills stripped down version of the Exora at RM57,000.
Apart from selling more cars, Proton’s earnings were also lifted by gains from previously undertaken rationalisation exercises.
The streamlining of its vendor and dealer network has led to a whole range of cost savings, some substantial over a short period of time.
“Increased efficiency across the board helped lower the average cost per unit by an estimated 3.9% quarter-on-quarter. The recent rationalisation of Proton’s dealership network has started yielding the desired results though the process has yet to be completed,’’ said CIMB Research in its note.
Proton managed to cut sales and distribution charges by 56% from the first quarter, thanks to the consolidation of its network with Edaran Otomobil Nasional Bhd.
Cost savings were also extended to administration charges and manufacturing overheads, which saw a quarter-on-quarter reduction of 7% and 6% respectively.
The company’s sales network too shrank from 278 at end-June to 265 at end-September. That reduction is still far from the planned 191 outlets Proton is looking at but it was good enough, on the back of higher demand for its vehicles, to lead to a bump in monthly sales per outlet.
During the July to September quarter, each dealer on average sold 50 cars monthly, which was a 25% improvement from the 40 cars per month average sold per dealership in the first half year.
More sales per dealer is essential in keeping its network profitable and happy.
“The shuttering of unprofitable and inefficient dealers immediately enlarged existing dealers’ trade area and coverage, which boosted sales per dealer outlet. This process is expected to continue,’’ said CIMB.
However, the rude shock from the results announcement was not how much fat Proton managed to cut. It’s the admission that there is a lot more to slash.
Proton said it can save RM530mil at the ebitda (earnings before interest, tax, depreciation and amortisation) level by financial year 2012/13 through an company-wide process re-engineering.
In short, there are a lot of efficiencies to be gained, a confession that would not surprise car watchers.
The better financial results and cost cutting saw Proton’s cash pile balloon to RM1.5bil, or RM2.32 a share. More savings expected to come in it will place Proton in good stead, considering the cash needed to fund its future plans.
For a start, Proton intends to operate like a global car company, and that means coming up with a car that will have global appeal and launching at least two models a year from the current one.
The global car would spearhead Proton’s attempt to penetrate the international market as relying on cars made for the Malaysian market would only take it so far.
Large amounts of cash too would be needed to turn subsidiary Lotus from a low priced and low volume sportscar manufacturer into one that is high priced and high volume.
Exploring green technologies like a hybrid or electric car, which Proton is already doing, will require cash, and maybe lots of it.
What sort of impact will this have on profitability?
Proton’s recent track record shows periods in which it posted better results only to slip back again. But this time around, that pattern may not be repeated.
“With management seeing sustainable margins, we expect Proton to deliver good results going forward,’’ said OSK Research in its note yesterday.
“Next year, Proton would be launching its centralised pre-delivery inspection hub, which would see its distribution cost being cut further as dealers will not be required to stock cars at their showrooms, which eliminates the rental cost for storage of cars.’’ it said.
Suzuki, Japan’s fourth-largest automaker and known for its strength in the compact car segment, said it would invest ¥20 billion (RM762 million) for a manufacturing site including engine assembly. It plans to start production of the 1.3-litre car in the southeast province of Rayong in March 2012.
Suzuki said it would build about 10,000 cars in the first year.
Bangkok has increased tax incentives to attract global carmakers to invest in output in Thailand of small passenger vehicles with certain specifications such as fuel economy of at least 20 km/litre under its so-called “eco car” project.
Car manufacturers investing in the project would enjoy cuts of up to 90 per cent in import tariffs on foreign car parts and material used for producing the vehicles.
Thailand’s state-run Board of Investment has also offered corporate tax exemption for at least five years provided their production of such cars reaches 100,000 vehicles a year in the first five years of operations.
Other Japanese carmakers such as Toyota Motor Corp, Mitsubishi Motors Corp, Nissan Motor Co, Honda Motor Co, as well as India’s Tata Motors Ltd, plan to the take part in the eco car project. — Reuters
P/S: Jim Roger said in his Book, A gift to my Children : Common Sense is not that common.
KUALA LUMPUR: Investors in the Swisscash Internet-based investment scam will now be able to get back part of their money following a consent judgment the Securities Commission (SC) entered into with two of the defendants in the case for a sum of RM31mil.
The SC said in a press release that the Swisscash scam involved an estimated total amount of US$83mil, which was what the Kuala Lumpur High Court ordered Albert Lee Kee Sien, Kelvin Choo Mun Hoe and Dynamic Revolution Sdn Bhd to pay in a judgment on Sept 25 last year.
According to SC chairman Tan Sri Zarinah Anwar, the SC entered into a consent judgement with Lee and Amir Hassan for the settlement sum.
She said the settlement was the largest ever in the history of the prosecution of such scams, which affected thousands of investors globally and prompted cross-border investigations involving seven other jurisdictions.
The previous largest settlement amount under the SC’s jurisdiction was RM2mil for insider trading in Padiberas Nasional Bhd, which was also distributed to affected investors.
“This is a milestone payout which is made possible following a consent judgment entered into with two of the Swisscash defendants,” Zarinah said, adding that the restitution would be based on a court-sanctioned distribution plan.
She told a media briefing yesterday that investors in illegal schemes could not expect regulators to get their money back for them as a matter of course. “Swisscash is an exception, in this case the recovery was only made possible not just by extremely painstaking efforts on our part but also by the close cooperation and support that we’ve been receiving from our counterparts in the various countries,” Zarinah said.
She said investors would have to show sufficient documentary proof of their principal investment and must not have been involved as recruiters in the scam. Investors who profited from their initial investment and still made claims would have their profits deducted from the claim sum while other criteria for consideration included whether investors heed the warnings by authorities before investing.
Zarinah said the first batch of restitution payments would be made early next year following approval from the court. She said 80% of the investors were male professionals and the profile was “not so typical of this kind of scam”.
She said to-date, there were 3,000 complaints filed against the scam.
This is bad news for those dumping NSTP when the 1st offered is announced.
Now , they did it again, TO REVISE THE TERMS OF OFFER TO GIVE BETTER OFFER AFTER ALL WEAK HOLDER DUMPING THEIR SHARES.
THE INSIDER MUST BE LAUGHING!
----------------------------------------------------------------------------------------------
KUALA LUMPUR: Shares of MEDIA PRIMA BHD [] and The New Straits Times Press (M) Bhd were voluntarily suspended from 9am on Wednesday, Nov 11 to 5pm on Thursday.
"The request for suspension is in view that the company will be making an announcement on the revision of the terms and conditions of the proposed offer," said Media Prima.
