OVERVIEW (August 23 2007): Pak Suzuki Motor Company Limited was incorporated in August 1983 as a
public limited company. Its shares are listed on all stock exchanges of the country. The company is a joint
venture between Pakistan Automobile Corporation Limited and Suzuki Motor Corporation (SMC), Japan.
PSMC's main operations include manufacturing, assembling, and marketing of cars, vans, pickups and 4x4
vehicles in Pakistan.
 
At present, the whole range of the Suzuki products currently marketed in Pakistan is being produced at the
Bin Qasim plant.
 
PSMC continues to be in the forefront in the automobile industry of Pakistan. Through effective marketing,
wide network of sales, service and spare parts dealers, the company has successfully maintained its market
share in the local market in terms of both production and sales. With a total market share of 57%, the
company dominates especially in the low-end (1000cc) car segment. This segment is very popular in the
middle-class income group of the country due to its affordability. Thus, the company enjoys high demand
and consequently high sales volume. Apart from this, it has a meager presence of 11% in the high-end car
segment (1300-1600cc).
 
In the higher end segment, the company has only Liana in its portfolio. Previously it assembled Baleno
locally which has been replaced by more advanced model of Liana. The export of Suzuki Ravi to
Bangladesh and the sheet metal parts of Suzuki Cultus to Europe has given PSMC a competitive edge over
other players. The company's exports in FY06 were touched Rs 35 billion mark. Further diversification in the
untapped market will give a boost to the company's overall performance. Above all, the highest deletion level
of Pak Suzuki amongst the industry players makes it least susceptible to rupee-yen exchange rate
fluctuations.
 
PSMC has consistently worked on its capacity expansion. The company has undergone three phases of
capacity expansion, which were completed in FY05, FY06 and FY07 when the capacity improves to a level
of 80,000, 120,000 and 150,000 vehicles respectively. The enhanced capacity has been absorbed and owes
much to the rising demand, easy availability of finance and booming GDP growth.
 
Pak Suzuki posted an after tax income of Rs 0.74bn (EPS: Rs 9.14) in 1Q07. Despite 29.4% increase in
sales of cars, the gross margins of the company declined by 12.4% in 1Q07 from 12.8% in 1Q06 mainly due
to 1.5% appreciation of Japanese yen against the Pak rupee (J¥ = Rs 0.5171 - average price in 1Q07 as
compared to Rs 0.5093 in the same period last year). Sales volume, increased by 29.4% in 1Q07 over 1Q06
and stood at 30,346 units whereas the number of cars assembled was 28,353 in the period under review.
Distribution and administrative expenses surged by 118.6% to Rs 402m in 1Q07 from Rs 184m last year
due to aggressive advertising and sales promotion by the company to enhance market share. Other income
declined due to reduced income on bank's deposits because of decrease in pending orders after capacity
enhancement