Pakistan Auto Industry Posts Huge Sales Gains
Auto sales in Pakistan jumped 61% in July, 2011 to 17,563 units from 10,942 units in the same month of last year. Pak Suzuki Motor Company led the auto sales up with 116 percent rise to 11,997 units from 4,503 seen in the same period last year. This is in sharp contrast to a Reuters report of 16% decline in auto sales in July across the border in India.
Earlier, Economic Survey of Pakistan 2010-2011 reported that the first 9 months of fiscal 2010-2011 saw production of television sets jump 28.6% and automobile production increase by 14.6%. From July 2010 to March 2011, production of cars, light commercial vehicles and two and three wheelers grew by 16.4%, 20.5% and 12.6% respectively. These figures confirm the return of Pakistanis' appetite for consumer durables after a significant drop from 2007-2008 to 2008-2009.
In a separate news story carried by Bloomberg, Swiss food giant Nestle's Pakistan subsidiary said its sales of consumer packaged goods rose 25% year-over-year. Engro Foods, a local Pakistani competitor of Nestle, reported its sales climbed 46 percent to 7 billion rupees in the last quarter.
Rising sales of consumer durables like cars and fast moving consumer goods (FMCG) represent a clear sign of the return of the middle class consumers who had pulled back since 2008. This improvement has been been aided by rising incomes in the rural areas stimulated by higher food and commodity prices. Fast moving consumer goods (FMCG) – or Consumer Packaged Goods (CPG) – are products that are sold quickly and at relatively low cost. Examples include non-durable goods such as milk, juices, sodas, toiletries, and packaged grocery items.
Nestle Pakistan's chief Ian Donald summed up the rising demand for his company's products as follows: “It’s a common perception that China and India are much bigger in terms of growth than Pakistan. But for Nestle, the per capita consumption of our products in Pakistan is twice as much as we have in China and India.” It should be noted that Nestle is the world's largest packaged food company.
Over the last two decades, Pakistan has continued to offer much greater upward economic and social mobility to its citizens than neighboring India. Since 1990, Pakistan's middle class had expanded by 36.5% and India's by only 12.8%, according to an ADB report on Asia's rising middle class released in 2010.
The ADB report on Asia's rising middle class confirms that Pakistan's middle class has grown to 40% of the population, significantly larger than the Indian middle class of about 25% of its population, and it has been growing faster than India's middle class.
Coming on the eve of Pakistan's Independence Day this Aug 14, the news of rising sales of cars and other consumer products could lead to more hiring and help revive Pakistan's economy which has been stagnant since 2008.
Related Links:
Haq's Musings
Resilient Pakistan
Pakistan's Rural Economy Showing Strength
Pakistan's Exports and Remittances Rise to New Highs
Incompetence Worse Than Corruption
Sugar Crisis in Pakistan
Agricultural Growth in India, Pakistan and Bangladesh
Pakistan's Rural Economic Survey
Pakistan's KSE Outperforms BRIC Exchanges in 2010
High Cost of Failure to Aid Flood Victims
Karachi Tops Mumbai in Stock Performance
India and Pakistan Contrasted in 2010
Pakistan's Decade 1999-2009
Musharraf's Economic Legacy
World Bank Report on Rural Poverty in Pakistan
Copper, Gold Deposits Worth $500 Billion at Reko Diq, Pakistan
China's Trade and Investment in South Asia
India's Twin Deficits
Pakistan's Economy 2008-2010
Auto Industry in India, Pakistan and China
Media Revolution in Pakistan
Earlier, Economic Survey of Pakistan 2010-2011 reported that the first 9 months of fiscal 2010-2011 saw production of television sets jump 28.6% and automobile production increase by 14.6%. From July 2010 to March 2011, production of cars, light commercial vehicles and two and three wheelers grew by 16.4%, 20.5% and 12.6% respectively. These figures confirm the return of Pakistanis' appetite for consumer durables after a significant drop from 2007-2008 to 2008-2009.
In a separate news story carried by Bloomberg, Swiss food giant Nestle's Pakistan subsidiary said its sales of consumer packaged goods rose 25% year-over-year. Engro Foods, a local Pakistani competitor of Nestle, reported its sales climbed 46 percent to 7 billion rupees in the last quarter.
Rising sales of consumer durables like cars and fast moving consumer goods (FMCG) represent a clear sign of the return of the middle class consumers who had pulled back since 2008. This improvement has been been aided by rising incomes in the rural areas stimulated by higher food and commodity prices. Fast moving consumer goods (FMCG) – or Consumer Packaged Goods (CPG) – are products that are sold quickly and at relatively low cost. Examples include non-durable goods such as milk, juices, sodas, toiletries, and packaged grocery items.
Nestle Pakistan's chief Ian Donald summed up the rising demand for his company's products as follows: “It’s a common perception that China and India are much bigger in terms of growth than Pakistan. But for Nestle, the per capita consumption of our products in Pakistan is twice as much as we have in China and India.” It should be noted that Nestle is the world's largest packaged food company.
Over the last two decades, Pakistan has continued to offer much greater upward economic and social mobility to its citizens than neighboring India. Since 1990, Pakistan's middle class had expanded by 36.5% and India's by only 12.8%, according to an ADB report on Asia's rising middle class released in 2010.
The ADB report on Asia's rising middle class confirms that Pakistan's middle class has grown to 40% of the population, significantly larger than the Indian middle class of about 25% of its population, and it has been growing faster than India's middle class.
Coming on the eve of Pakistan's Independence Day this Aug 14, the news of rising sales of cars and other consumer products could lead to more hiring and help revive Pakistan's economy which has been stagnant since 2008.
Related Links:
Haq's Musings
Resilient Pakistan
Pakistan's Rural Economy Showing Strength
Pakistan's Exports and Remittances Rise to New Highs
Incompetence Worse Than Corruption
Sugar Crisis in Pakistan
Agricultural Growth in India, Pakistan and Bangladesh
Pakistan's Rural Economic Survey
Pakistan's KSE Outperforms BRIC Exchanges in 2010
High Cost of Failure to Aid Flood Victims
Karachi Tops Mumbai in Stock Performance
India and Pakistan Contrasted in 2010
Pakistan's Decade 1999-2009
Musharraf's Economic Legacy
World Bank Report on Rural Poverty in Pakistan
Copper, Gold Deposits Worth $500 Billion at Reko Diq, Pakistan
China's Trade and Investment in South Asia
India's Twin Deficits
Pakistan's Economy 2008-2010
Auto Industry in India, Pakistan and China
Media Revolution in Pakistan
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Sales stood at 29,537 units from July to August 2011 against 21,833 units sold in the preceding year, according to data released by Pakistan Automotive Manufacturers Association on Monday.
The incentive given by the government in terms of removal of 2.5% special excise duty on imported and locally manufactured vehicles coupled with reduction in general sales tax to 16% from 17% were the core reasons for the growth, said Summit Capital analyst Sarfraz Abbasi.
Growth was primarily led by Pak Suzuki Motor Company as its sales rose by 67% to 18,301 units followed by Indus Motor by 6% to 8,829 units.
The biggest leap forward was seen in Suzuki Swift sales that tripled to 1,274 units against 421 units in the same period last year. Liana, under the domain of 1,300cc engine capacity and above, recorded 149% jump in its sales to 127 units in comparison with just 51 units sold in the same period last year.
Meanwhile, tractor sales dropped by a hefty 78% to 1,993 units on the back of higher input taxes and plant shutdowns during the period. Al-Ghazi Tractors’ production operation remained completely shut during August.
Moreover, car sales declined by 31% in August alone amid less working days due to Eid holidays and lower production on account of Ramazan.
Company-wise breakup shows that this time Indus Motor took the front seat to lead sales with an increase of 27% to 4,728 units compared with 3,360 units sold in the same period last year.
New variants launched by the company in 1,600cc segment and CNG vehicles introduced in the already established market acted as a catalyst in this growth.
http://tribune.com.pk/story/250984/car-sales-rise-35-per-cent/
Passenger car sales in India grew at a scorching 30% in 2010-11 (April-March). But with rising interest rates on auto loans and a sharp rise in petrol prices, car sales this year have slowed down to a crawl.
In fact passenger car sales crashed 16% in July and 10% in August, according to data by Society of Indian Auto Manufacturers (SIAM). Strike at Maruti Suzuki’s plant in Manesar, which had hit output of one of its most selling cars, the Swift hatchback, has only added to the pressure on overall industry sales.
SIAM has already cut its growth forecast for car sales to 10-12% from earlier 16-18%. Last month it said it would further downgrade growth forecast for the full year.
Research firm Crisil painted a bleak picture earlier in the week, saying it expects "growth in passenger vehicles to decelerate sharply to 2-4% with domestic cars growing at a mere 0-3% as against earlier forecast of a growth of 8-10%."
Crisil said its latest downgrade was prompted by Rs 3 rise in petrol price and 25 basis points hike in interest rates by Reserve Bank of India in September.
Other analysts, like Nikhil Deshpande of Pinc Research and Sejal Jhunjhunwala of Way2Wealth Securities too agree that sentiments are not looking good this year, despite the ongoing festive season.
"Automakers had expected car sales to pickup in the festive season. But there were two conditions -- interest rate hike cycle would peak out and fuel prices wouldn’t rise. But there has been no respite on either front," Deshpande told moneycontrol.com
No wonder then the automakers are going all out to tempt customers now, with more offers this year than last year, in the hope that people will spend impulsively during Dassera-Diwali. Fiat India, for instance, is offering benefits up to Rs 1.30 lakh on its Linea sedan, and Rs 75,000 on the Punto hatchback. Fiat’s offer includes insurance at Rs 1, exchange benefits, gift cheque and free road side assistance for 50 months.
http://www.moneycontrol.com/news/business/discounts-galore-as-passenger-car-sales-hit-speed-bumps_592863.html
...“The rural push is aimed at the boisterous youth in these areas, who have bountiful cash and resources to increase purchases,” Shazia Syed, vice president for customer development at Unilever Pakistan Ltd., said in an interview. “Rural growth is more than double that of national sales.”
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Nestle Pakistan Ltd., which is spending 300 million Swiss francs ($330 million) to double dairy output in four years, boosted sales 29 percent to 33 billion rupees ($377 million) in the six months through June.
“We have been focusing on rural areas very strongly,” Ian Donald, managing director of Nestle’s Pakistan unit, said in an interview in Lahore. “Our observation is that Pakistan’s rural economy is doing better than urban areas.”
The parent, based in Vevey, Switzerland, aims to get 45 percent of revenue from emerging markets by 2020.
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Haji Mirbar, who grows cotton on a 5-acre farm with his four brothers, said his family’s income grew fivefold in the year through June, allowing him to buy branded products. He uses Unilever’s Lifebuoy for his open-air baths under a hand pump, instead of the handmade soap he used before.
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Sales for the Pakistan unit of Unilever rose 15 percent to 24.8 billion rupees in the first half. Colgate-Palmolive Pakistan Ltd.’s sales increased 29 percent in the six months through June to 7.6 billion rupees, according to data compiled by Bloomberg.
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Unilever is pushing beauty products in the countryside through a program called “Guddi Baji,” an Urdu phrase that literally means “doll sister.” It employs “beauty specialists who understand rural women,” providing them with vans filled with samples and equipment, Syed said. Women in villages are also employed as sales representatives, because “rural is the growth engine” for Unilever in Pakistan, she said.
While the bulk of spending for rural families goes to food, about 20 percent “is spent on looking beautiful and buying expensive clothes,” Syed said.
Colgate-Palmolive, the world’s largest toothpaste maker, aims to address a “huge gap” in sales outside Pakistan’s cities by more than tripling the number of villages where its products, such as Palmolive soap, are sold, from the current 5,000, said Syed Wasif Ali, rural operations manager at the local unit.
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Unilever plans to increase the number of villages where its products are sold to almost half of the total 34,000 within three years. Its merchandise, including Dove shampoo, Surf detergent and Brooke Bond Supreme tea, is available in about 11,000 villages now.
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Pakistan, Asia’s third-largest wheat grower, in 2008 increased wheat prices by more than 50 percent as Prime Minister Yousuf Raza Gilani sought to boost production of the staple.
“The injection of purchasing power in the rural sector has been unprecedented,” said Sherani, who added that local prices for rice and sugarcane have also risen.
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Increasing consumption in rural areas is forecast to drive economic growth in the South Asian country of 177 million people, according to government estimates.
Higher crop prices boosted farmers’ incomes in Pakistan by 342 billion rupees in the 12 months through June, according to a government economic survey. That was higher than the gain of 329 billion rupees in the preceding eight years.
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Telenor Pakistan (Pvt) Ltd. is also expanding in Pakistan’s rural areas, which already contribute 60 percent of sales, said Anjum Nida Rahman, corporate communications director for the local unit of the Nordic region’s largest phone company.
0.5 kg consumption per capita but growing at double digit rate
http://www.igisecurities.com.pk/pdf/Unilever_Pakistan_Limited_Initiating_Coverage.pdf
NEW DELHI – Several auto makers in India have decided to increase their vehicle prices in January due to rising raw material costs and a fall in the local currency’s value, which has made imports of parts more expensive.
The local units of Hyundai Motor Co., General Motors Co., Ford Motor Co. and Toyota Motor Corp. will increase vehicle prices on Jan. 1. Suzuki Motor Corp’s unit already increased prices of its diesel models last month.
The Indian rupee is the worst-performing Asian currency this year, with the U.S. dollar rising nearly 16% against the local unit. Auto makers, especially the local units of foreign companies, import large amounts of parts and the rupee’s weakness has driven up their costs.
They have also been hit by higher prices of key raw materials such as steel and aluminum.
Raising vehicle prices could further damp demand for vehicles, which has remained weak since June due to rising fuel costs and higher interest rates on loans.
Hyundai Motor India Ltd.’s director of sales and marketing, Arvind Saxena, said factors such as inflation and the rupee’s depreciation have “compelled us to look at a price increase.”
The company will increase the prices of all its vehicles by 1.5%-2.0%.
Maruti Suzuki India Ltd. raised prices of the diesel variants of four models by up to 10,000 rupees ($195), and it will consider a similar increase for gasoline-powered vehicles after December as an appreciation in the Japanese yen has made parts imports expensive, India’s largest car maker said on Dec. 1.
The company expects its operating profit margin to shrink 1.0 percentage point during October-March due to the currency effect.
Ford India will raise prices of all vehicles by up to 3%, while General Motors India will increase prices of most models by 1%-2%.
P. Balendran, vice president for corporate affairs at GM India, said it will increase the price of the diesel variant of its Beat small car by 15,000 rupees as it is currently being sold at introductory rates.
Toyota Kirloskar Motor Pvt. Ltd. also said it will lift prices by up to 3%.
Honda Siel Cars India Ltd., however, said it isn’t considering raising prices right now. “Our immediate priority is to make sufficient cars to meet demand,” said Jnaneswar Sen, senior vice president of marketing and sales.
The company has been forced to cut production due to a shortage of parts from Thailand following heavy floods there.
A Tata Motors Ltd. spokesman refused to comment, while executives at Mahindra & Mahindra Ltd. couldn’t be contacted.
http://blogs.wsj.com/drivers-seat/2011/12/07/car-prices-to-rise-in-india/
The US Secretary of State Hilary Clinton presented Proctor & Gamble (P&G) with the thirteenth annual Secretary of State’s Award for Corporate Excellence (ACE) for the company’s exceptional corporate social responsibility (CSR) efforts in Pakistan.
Bob McDonald, Chairman of the Board, President and Chief Executive Officer of The Proctor & Gamble Company accepted the award in a ceremony held at the State Department in Washington, DC on Wednesday.
US Consul General in Karachi William Martin and P&G Pakistan Country Manager Faisal Sabzwari joined the ceremony in Washington via digital video conferencing.
Addressing a news conference at the Karachi Consulate, Martin said that this was the first time that a firm based in Pakistan had received this prestigious award.
He said this recognition is likely to help boost foreign investments in Pakistan as international organisations are bound to take notice of the quality work being conducted in the country. He stated that this award signified the interest American investors have in Pakistan.
He further said that this award had been presented to a firm run and managed by Pakistanis which highlights the progressive social attitude of the people here. Sabzwari said that P&G Pakistan had made massive investments in the country, the last one being a $40 million investment into a laundry manufacturing facility.
He also mentioned the new plant established by the organisation in Port Qasim. Speaking about the award, he said that this year, 62 nominations were received for American companies operating in 38 different countries. Of these, some 13 companies were selected as award finalists. P&G Pakistan and Nigeria were selected as the winners among this group.
P&G Pakistan was awarded the ACE for the company’s efforts under its ‘Live, Learn, and Thrive’ CSR programme, including humanitarian assistance efforts to provide clean drinking water, food, hygiene products. It also made medical care available to over 1.9 million affected residents after the devastating 2010 floods. It also established a network of schools and supported orphanages. “A total contribution of over $2 million was made in flood aid,” he said.
http://www.thenews.com.pk/TodaysPrintDetail.aspx?ID=88426&Cat=3
Faisalabad has historically been a city that conducted the manufacturing for global brands. Yet as the middle class in Pakistan expands, it appears that many of the city’s residents are affluent enough – or aspirational enough – to become consumers of those brands, resulting in booming sales for retailers and local franchisees of international brands.
Most of the sales of branded clothing and jewellery is taking place through franchises that have bought the right to sell these products to consumers in Faisalabad. The demand for these products is fuelled by the vast segment of the middle class that can afford to buy global brands but not necessarily to fly out to Dubai – or even to Karachi and Lahore – to buy them.
A series of interviews conducted by The Express Tribune, both amongst consumers and retail managers, suggests a voracious and growing appetite for branded clothing lines. And it seems that the economic slowdown has done nothing to decrease sales in this segment of the market.
“The higher income buyers of international brands never seem to get affected by economic disorder in the country,” said Sohail Safdar, a franchise manager for Charles & Keith, the Singapore-based company that sells its own brand of women’s shoes and bags. “Many of our buyers do not want to have to travel abroad to buy these products. That has created a boom in retail sales and led many retail franchise owners to think hard about expansion.”
“Sales of international brands keeps getting better and better and has begun to lure in even more brands,” said Syed Suleman Raza, a manager at one of the Nike franchises in Faisalabad.
The underlying cause of the trend seems to be a willingness by a large part of the Pakistani middle class to be willing to pay significantly higher prices for what they perceive to be higher quality. And given their longer durability, many branded products are seen as good value for money.
“Branded tend to be more and last two to three seasons,” said Sonia Razzaq, a shopper at one of the upscale malls in Faisalabad.
Nonetheless, prices are steep for many products, with shoes frequently costing Rs5,000 per pair or more. Jackets, shirts and women’s dresses go for even higher, commanding prices in the range of Rs10,000 or higher. These prices are well beyond the reach of most ordinary Pakistanis and yet a sizeable proportion of the population can easily afford them.
“Our customers are very brand-conscious and buy these products without any hesitation at the price tag or any attempt at bargaining,” said Sheikh Sultan, a manager at a franchise of The Body Shop, a UK-based cosmetics brand.
http://tribune.com.pk/story/354707/the-rise-of-the-pakistani-middle-class-international-brands-compete-for-faisalabads-attention/
Nestlé Pakistan seems to be doing well in 2012.
The Companys financials for the first quarter ended March 31, 2012 show that the foods giant posted a profit after tax of Rs1.664 billion.
Nestlés product portfolio in Pakistan is truly diverse, which includes dairy products such as Milk Pak, Nido, Everyday and yogurts; beverages like Fruita Vitals, Milo and Nescafe; and food products like Maggi noodles, Cerelac, breakfast cereals, and confectionaries.
The Companys net sales crossed the milestone of Rs20 billion in 1QCY12, as the milk and nutrient businesses seem to be growing.
The competitive landscape has drastically changed for Nestlé Pakistan in recent years following the arrival of Engro Foods and strong performance of Unilever Foods.
Nestlé has had to deal with multiple competitors across various product lines; however, its consistent revenue growth shows that the size of the pie is expanding as the competition is penetrating deeply into the addressable markets.
Nestlés topline grew by a strong 24 percent during 1QCY12, but somewhat diluted by a larger, 25.4 percent increase in cost of goods sold.
Resultantly, these costs consumed 72.7 percent of net sales, and brought down the gross margin by 78bps compared to same period last year.
The spiraling prices of key commodity inputs (wheat and milk) along with the energy crisis continue to weigh heavy on the margins.
Nearly 15 percent increase is seen in the distribution & selling expenses, whereas the administrative expenses rose by a whopping 31 percent.
Nestle spent Rs12.53 on these two expense heads for every 100 bucks it earned in the quarter under review.
However, compared to the competition, Nestlés distribution & administrative expenses are controlled due to its vast network and economies of scale.
Nestlés non-operating performance is clearly an area that needs to complement the decent operating performance.
For instance, the finance cost jumped by a whopping 125.7 percent; the other operating expenses increased by 52.2 percent; and the other operating income decreased by 52.17 percent.
Healthy topline growth, coupled with somewhat controlled operating expenditures, ensured that Nestlé posted a double-digit profitability growth during 1QCY12.
Yet the net margin dropped by 93bps to come down to 8.24 percent, owing to the slippages mentioned earlier.
However, the profit of over 1,600 million rupees is sweeter still, especially for shareholders who earned Rs36.71 on each share during the period.
Despite the rising input costs and energy issues, Nestlé is well-placed to capture a bigger slice of Pakistans food market which is forecasted by various estimates to grow in double-digit in the coming years.
Services like Nestlé Professional - which markets food and beverage solutions for out-of-home establishments like restaurants, offices, airports, universities and hospitals - can also boost revenues.
Nestlé may be leading in many of the product lines it operates in.
However, the packaged goods share is still a fraction of the total market, and that is where the promise for sustained future growth lays.
http://www.brecorder.com/br-research/42:foods/2438:nestle-pakistan-limited/?date=2012-04-18
The American Business Council, that includes the Pakistan units of Coca-Cola Co. and Cisco Systems Inc., plans to invite 10 U.S. companies a year to invest in the South Asian nation and take advantage of rising consumer demand.
“Branded product penetration in Pakistan is so low that the potential for growth is immense,” Saad Amanullah Khan, president of the council, said in an interview in Karachi today. Up to 80 percent of American companies operating in Pakistan, especially technology and consumer goods companies, had a “good year” in 2011.
Pakistan needs to increase overseas investment to help meet an economic growth target of 4.3 percent in the year that began July 1. Foreign direct investment declined 50 percent to $813 million in the year ended June 30, according to the central bank.
The council plans to double its membership of U.S. companies from 63 in the next five years and increase the total investment to $1 billion from $663 million, said Khan, 51, who is also chief executive officer of Gillette Pakistan Ltd.
Pakistan agreed this month to end a seven-month ban on North Atlantic Treaty Organization trucks crossing its territory on the way to Afghanistan, easing tensions with the U.S., its biggest trading partner. The routes were reopened after U.S. Secretary of State Hillary Clinton apologized for the killing of 24 Pakistani soldiers in a November border strike by American helicopters.
Pakistan’s credit rating was lowered deeper into junk status by Moody’s Investors Service on July 13, which cited dwindling currency reserves and political instability. The $200 billion economy faces the fastest inflation in Asia, lingering power blackouts, an insurgency on the Afghan border and reduced aid flows.
http://www.businessweek.com/news/2012-07-16/american-business-council-of-pakistan-to-target-fresh-investment
Novatex Limited has successfully commissioned a project to produce Biaxially Oriented Poly Ethylene Terephthalate (BOPET) film.
This is a pioneer industry for Pakistan, bringing in technology and machinery, which is so far non-existent in the country.
Habib Bank Ltd, United Bank, Faysal Bank and Standard Chartered financed this project and the plant commenced operations in June 2012.
BOPET Polyester film, which will be produced by Novatex, has due to its superior attributes become a necessary packaging material for food, etc allowing the introduction of strong aroma retention and beautiful printed small as well as bulk pouches for tea, ketchup, mayonnaise, salad dressings, spices, fruit and vegetables packaging, food pastes as well as milk powder, good quality biscuits/snacks washing powder and shampoos, etc.
The current consumption of BOPET in Pakistan is over 16,000 tonnes and it will cross 20,000 tonnes following its availability locally.
Pakistan will become self sufficient in BOPET polyester film and save import of $40 million besides will generate export in excess of $30 million.
BOPET polyester film is also used for LCD/LED TV panels, solar panels, cable interior, salma sitara type decorations and x-ray film.
The project of Novatex has been set up with the latest German technology supplied by Lindauer Dornier of Germany.
It has a capacity to produce 31,000 tonnes BOPET per annum with 8.7 metre width and is the largest capacity and width currently available in the world for BOPET film lines.
http://paktribune.com/business/news/Pakistans-first-BOPET-polyester-film-plant-starts-production-10091.html
The Pakistan car industry grew by 23% to 178,753 units YoY in FY12 where PSMC contributed 60% followed by INDUS contributing 29% to the total industry sales. The increase can be attributed primarily to 1) good agricultural income 2) deferred sales due to reduction in Sales Tax and 3) Yellow cab scheme.
In Jun12,car sales stood at 19,140 units, depicting an exceptional increase of 158% from 7,419 units sold in Jun11 mainly because of the low base effect as the government was expected to reduce Sales Tax by 1% in Jun11.
PSMC had a phenomenal FY12 as it witnessed a 40% YoY jump in its sales figures contributing more than 50% to the industry’s total sales pie. This growth in units from 79943k to 112157k units was mainly triggered by Punjab Government Yellow cab scheme where PSMC was the prime beneficiary.
INDU also saw its sales units go up to 54477 units from 50015k (9% up in FY12) on the back of good agricultural growth and subsequently good rural income.
Segment wise YoY analysis makes Corolla(+58%), Cultus(+ 20%) and Mehran(+ 46%) the star performers in 1300cc, 1000cc and 800cc respectively. We believe Corolla on the back of agricultural income and Cultus and Mehran as substitutes to Alto and Cuore will continue to capture the customer interest.
Auto sales in June-2012 clocked in at 19.2k units, which is an increase of 15%MoM. This improvement in sales is most likely due to anticipated price hikes by the manufacturers owing to conversion to Euro II compliance and steep depreciation of Rupee. On a YoY watch, auto sales soared by 155%.
However, this growth is misleading as sales last year in June abnormally declined owing to expectation of price cuts. As a result, auto sales reached 179k units (up 22%YoY) in FY12 vs. our expectation of 175k units. In expectation of stiff competition from imports, we expect growth to slowdown to 6% in FY13. We presently have a ‘Market-Weight’ stance on the sector, with Indus Motor (INDU) as our preferred play.
FY12 culminated with a growth of 22%YoY, with sales touching 179k units. The improvement in demand was largely led by the subsidized Yellow Cab scheme offered by the Punjab government. We expect the growth to slow down to 6% in FY13 (sales likely to reach 190k units) owing to a lower amount allocated to the cab scheme this year and stiff competition from imports.
The announcement of a new long term auto policy (termed as AIDP-2) will be pivotal for the sector going forward.
Significantly lower duties on CBU imports in the policy can substantially hurt the local manufacturers. We retain our outlook on the sector at ‘Market-Weight’, with INDU as our preferred play. The stock trades at an FY13 PE of 5.8x, and offers a dividend yield of 7.4%
http://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/business/13-Jul-2012/car-sales-speed-up-23pc-in-fy12
Global automobile giant Toyota’s affiliate in Pakistan announced that the 2012 financial year was its most profitable ever in the country, earning Rs4.3 billion in net income, a 57% increase over the previous year.
Indus Motor Company – a company that is 37.5% owned by Japan’s Toyota – announced its annual results on Thursday. The company’s revenues rose by nearly 25% to reach Rs75 billion, largely on the back of increased car sales, though higher prices were also a factor. The company sold over 55,000 cars during the financial year that ended on June 30, 2012, its highest ever for a single year. Both revenues and profits were the highest in the company’s history in Pakistan.
Investors in Indus Motors are likely to be pleased by the management’s decision to announce a Rs24 per share dividend, bringing the total annual payout to Rs32 per share. Given the company’s earnings per share of Rs54.74, that comes to a payout ratio of 58.5%.
Indus Motors assembles the Toyota Corolla, easily the most popular sedan in the Pakistani market, made even more attractive by the company’s wide network of dealerships and after-sales service points, which help the car retain a high resale value. As incomes in Pakistan’s urban middle class have recovered after the 2008 financial crisis, sales of the sedan have bounced back to pre-crisis levels.
Nonetheless, analysts point to several dangers to the company’s business. “Demand for new cars in Pakistan will decline, going forward,” said Atif Zafar, a research analyst at JS Global Capital, an investment bank. “Local car manufacturers are expected to remain under pressure from competition with imported used cars.”
Nonetheless, sales figures for new cars have been improving, reaching a four-year high of over 157,000 units in 2012, an almost 23% increase over the previous year. Indus Motors share of that is almost 35%.
Officials at Indus Motors concurred with JS Global’s assessment that new car demand had slowed in recent weeks, largely due to an expectation among car buyers that the government will relax rules on the import of used cars. Low demand is forcing local manufacturers to cut back on production, they said. Indus suspended its production for four days in July and plans six off-days in August to offset the problem of slow demand.
The largest carmaker of country, Pak Suzuki Motors, is also expected to see a hit in its sales this year. This year, the Punjab government has allocated fewer funds for the Punjab taxi scheme so one can expect that Pak Suzuki may get less orders compared to last year’s order of 20,000 units, Zafar said.
While car importers vow to double car imports this year, local carmakers are continuously pressuring the government to reduce the age-limit of used car imports from the current five years to three years. Pakistan imported 55,000 cars in fiscal year 2012, a massive increase over the 18,000 cars in previous fiscal year.
http://tribune.com.pk/story/419836/profits-at-toyotas-pakistan-affiliate-hit-all-time-high-in-2012/
Engro with its rich history of over four decades of developing the agricultural sector of Pakistan used dairy as a stepping stone to enter the foods business in 2005 to give further impetus to its already diversified business portfolio including fertilisers, petrochemicals, energy, trading and chemicals storage and handling.
In a span of just seven years, with a compound annual growth rate (CAGR) of 65 percent and a planned infrastructure investment in 2012 to the tune of eight billion rupees, Engro Foods has become the country's fastest growing local company catering to a wide demographic consumer base from high income groups to the more economically conscious segment of the market both in Pakistan and abroad.
Serving over five million consumers nation-wide every day, Engro Foods had revenues of about Rs 19.76 billion during 1H-2012 with profitability registering an increase of over 450 percent to close at Rs 1.02 billion. Since its inception Engro Foods has invested heavily in dairy development initiatives, cold chain infrastructure, enhancing capabilities of dairy farmers across Pakistan through innovative breakthroughs that have redefined the milk collection standards and benchmarks in the dairy industry. Employing over 12,000 individuals both directly and indirectly, Engro Foods' continues to touch and improve life for over 160,000 dairy farmers through improved payment cycles, guaranteed collection, improved margins and up to a 15 percent increase in milk yields. Through its wide network of over 900 milk collection centres, Engro Foods focuses its impact at the most economically challenged communities in Pakistan - an effort that has also been recognised at local and international fronts including the IFC managed G20 Challenge on Business Innovation where Engro Foods was declared the winner from over 300 global contracts.
The Company also had the unique opportunity to become the first company in Pakistan to produce one billion packs within a year in 2010 alone; a distinction that has been achieved by only 18 companies out of 3,000 Tetra Pak customers world-wide. Living its vision of 'elevating consumer delight world-wide' the business established its Global Business Unit (GBU) and acquired Al-Safa Halal - the oldest Halal meat brand in North America in 2010. With presence in key retail stores including Loblaws, Wal-Mart, Sobeys, Metro, Kroger etc, Engro Foods GBU has obtained a market share of 15 percent in Canada and three percent in USA in the branded foods category.
Speaking at the occasion, Afnan Ahsan - CEO Engro Foods said: "The story of Engro and that of Engro Foods is a source of national pride. The fact that in a short span of seven years a home-grown multinational company has been created - with a geographic footprint spanning across Pakistan, Afghanistan, US and Canada - is testament to the vision and business acumen of the Company. Engro Foods is an example that through focused approach companies can create real business value - not just in the Pakistani market but also globally." Building on plans for the future of the Company Afnan said: "We are in the early stages of our growth trajectory and looking ahead we will continue to further explore diversification with focused growth in our dairy and beverage business - both locally and on the international front. We are also confident that we will continue to create real value for all our stakeholders by pursuing an inclusive growth strategy that positively impacts each individual through the value chain process."
http://www.brecorder.com/business-a-economy/189/1226476/
Tractor manufacturers have more than 10,000 tractors of various makes in their stocks for immediate delivery under the Punjab government's Green Tractor Scheme 2012-13 to the farmers before sowing of Rabi crops, a senior tractor industry executive told Business Recorder, here on Friday.
The Punjab government has completed the process of providing 10,000 tractors to farmers through transparent computerised balloting of 0.275 million applicants of 18 to 35 years age having land holding of 2 and a half acres to 25 acres irrigable and 50 acres arid land across the province. The Punjab government is providing subsidy of Rs 200,000 on each tractor. The provincial government has so far provided 30,000 tractors during the past four years under the Green Tractor scheme to the small farmers with a subsidy of Rs 6 billion to boost agriculture production in the province.
The executives said though the auto manufactures have increased prices of cars t recently yet the tractor industry is not only maintaining June 2012 prices but also giving one percent discount on the sale of tractors under the Green Tractors Scheme. They however suggested that the government should not delay payment of Rs 200,000 to the tractor manufacturers given as subsidy on the Green tractors. The prices of tractors manufactured in Pakistan are still the most competitive in the region despite severe electricity load-shedding and increased cost of production, they emphasised.
They said that small farmers suffered huge financial losses due to rain floods in Sindh and Balochistan in the out-going monsoon season this year, therefore the government should not increase the proposed rate of General Sales Tax from 5 percent to 10 percent in January next year as it would put an additional burden on the agriculture sector.
They said that the tractor industry sold 5,675 tractors in the first two months of the current financial year as against 2,000 of the previous year. President Farmers Associates of Pakistan (FAP) Dr Tariq Bucha has appreciated the Punjab government's Green Tractors Scheme and said the government should make immediate arrangements for delivery of the tractors to the lucky farmers so that they could be used them for preparing the fields before sowing of the Rabi crops seeds in time. Bucha demanded of the government to also provide subsidy and reduce the rate of GST on accessories such as trolleys, ploughs, etc.
http://www.brecorder.com/agriculture-a-allied/183/1245125/
ISLAMABAD: All arrangements have been finalized to hold balloting of Benazir Tractors Scheme to provide subsidized tractors for growers.
The balloting for the scheme is expected to be held on September 6.This was stated by the Federal Minister for Food and Agriculture (MinFA), Nazar Muhammad Gondal responding to the live calls of the people after inaugurating the radio programme “Aaj Mandi key Bhao”, here on Monday.
The minister said that preparations had been finalized to provide 10,000 tractors to farmers under Benazir Tractor Scheme.
It may be recalled that about 355,000 printed application forms had been provided to farmers through the ZTBL branches in addition to those who applied on-line.
About 340,000 application were received, of which 277,106 were finalized for balloting of the scheme.
For Punjab province 5000 tractors, Sindh 2000, NWFP 1200 and for Balochistan 850 tractors would be allocated.
In AJK, FATA 350 tractors each while FANA 200 tractors and Federal Capital 50 tractors quota is fixed.
http://www.pakistantimes.net/pt/detail.php?newsId=3863
MAIDUGURI -The Borno State Government has planed to import 1,000 heavy duty tractors from Pakistan to harness the agricultural potential of the state.
Gov. Kashim Shettima who made this known while speaking with newsmen in Maiduguri.
Shettima explained that an agreement had already been signed by the Pakistani government and the Borno state government for the supply of the tractors.
“We are just coming back from a working visit to three countries - Pakistan, Turkey and India.
“The visit was aimed at exploring avenues for partnership with these countries on agricultural development.”
Shettima said the manufacturers of the tractors had agreed to supply them in a few months time.
“We are trying to see how we can tap from the experience of these countries to empower our people.
“Our farmers are still using hoes and cutlasses when other countries are busy using advanced technology in farming.”
Shettima said the tractors would be distributed to farmers across the state to boost agricultural production.
He said the objective was to enhance food production and fight poverty among the people.
“We have realised that the best way to tackle the current insurgency in the state is to develop agriculture and provide jobs for our employed youths.
“We believe that once we empower the youths the problem of the insurgency will be tackled.”
Shettima said the government would also collaborate with the Chad Basin Development Authority (CBDA)
toward cultivating the 70,000 hectare South Chad Irrigation Scheme (SCIS) in the state.
“We are going to partner with the CBDA toward cultivating the 70,000 hectares of land at the SCIS.
“We are going to supply fertiliser, and other implements to farmers to encourage them.”
http://nigerianobservernews.com/16102012/news/Other%20News/othernews14.html
JS Business & Global Venture was established in 1999. The company is one of the pioneers in Pakistan for exporting the Tractors, Agricultural Machinery and a range of Implements.
Agriculture sector being the dominant sector of Pakistan’s economy, as a market of material products contribute substantially in and outside the country. The JS Businesses & Global Venture has the endowment to fulfill the multidimensional needs of National and Multinational customers.
The company is exporting the agricultural products almost to the whole world, especially to Holland, England, Kenya, South Africa, Nigeria, Dubai, Jordan, Sri Lanka and Bangladesh etc. etc.
With the support of it’s highly qualified and Professional team developed and maintain highest service standards in the company, and of course with an ever increasing customer support JS Businesses & Global Venture showed an unprecedented growth within very short period of time.
We believe that each customer is a long term business partner and strive to meet their requirements swiftly and professionally.
We are main dealer for Millat, Massey Ferguson Tractors in Lahore, Pakistan. We also have a long range of Agricultural Implements, Millat Electricity Generators, Millat Prime Movers and Fork Lift Truck (Fork Lifter).
Following Tractor’s models are available MF 240, MF 260, MF 375, MF 385, and MF 385 4WD.
http://www.jsglobalbusiness.com/
With local policy aimed at making Pakistan a favourable trading country, rather than a manufacturing one, the significant inflow of used cars into Pakistan has, in the past, constricted the local automotive industry. This may be about to change, however, following a decision by the country’s Economic Coordination Committee (ECC).
The ECC has decided to reduce the age limit of used car imports into Pakistan to three years, from the previous limit of five years, according to The News International. This directive will come into effect on 15 December 2012.
The Economic Coordination Committee is a cabinet-level body responsible for final decisions pertaining to Pakistan’s economy. Set up under the Chairmanship of the country’s Central Finance Minister, the committee comprises ministers in charge of the country’s economic ministries.
This decision has drawn mixed reactions from the various automotive industry bodies in Pakistan. The Pakistan Automotive Manufacturers Association (PAMA) has welcomed this decision, as it favours local vehicle manufacturers. The association’s Chairman, Parvez Ghias, feels that this move is in the greater national interest.
The All Pakistan Motor Dealers Association (APMDA), on the other hand, has called this move unfair and unjust, as it is a setback to the import of used cars. Chairman HM Shahzad says this cut in age limit, along with the depreciation policy in force at present, will push the prices of cars significantly.
Earlier, Daily Times, citing industry experts, said the government lost nearly Pakistani Rs16.5bn (US$171.79m) due to the import of 55,000 vehicles. Around US$371m were reportedly spent on the import of used cars last year. According to Shahzad, though, this move to restrict import of used cars into Pakistan will result in a Pakistani Rs32bn loss to national exchequers
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The report stated that there were more than 100 vehicle assemblers in the country. These companies assemble cars, buses, trucks, two- and three-wheelers and tractors. The number of automotive parts manufacturers, however, totals approximately 1,700.
Japanese companies lead the list of vehicle assemblers in Pakistan, while local companies form the bulk of the country’s parts manufacturers. This is compounded by a weakness in terms of manufacturing systems and technology in the supply industry, which the report attributes to a lack of competition brought on by localisation requirements.
....
http://www.automotiveworld.com/articles/manufacturing-logistics/ecc-move-to-restrict-import-of-used-cars-brings-cheer-to-assemblers-in-pakistan/
In support of his claim, he said average cost of a Pakistani car (excluding taxes) is Rs750,000. An average Pakistani car uses 60% of local components and the value of such components is around Rs450,000. This is the amount that the parts makers lost on each imported car, he said.
Most people believe that locally assembled cars are much more expensive than vehicles manufactured in other countries, but this is a wrong perception, the industry representatives said while giving a comparison between prices of Pakistani cars and those manufactured in regional countries.
Pakistani cars are cheaper than most cars manufactured in India, Allawala claimed, adding 1,800cc Toyota Corolla is being sold in India for $16,334 (retail price excluding taxes) while the price of the same car in Pakistan is $13,253, lower by $3,081.
Including taxes, the retail price of Toyota Corolla in India is $26,744 while in Pakistan it is $19,781, a difference of $6,963.
Similarly, the retail price of 1,800cc Honda Civic in India he said was $19,216 (excluding all taxes) while the same car is being sold for $15,214 in Pakistan, a difference of $4,002, he said.
After including all taxes, the difference in prices of Honda Civic in Pakistan and India is $7,403. In India, Civic is being sold for $30,455 while it is available at $23,052 in Pakistan.
The automakers and vendors have underlined the need for revision in the import duty slabs, saying the old duty structures are favouring car importers.
In response to a question, PAMA Director General Abdul Waheed cautioned the consumers, who are opting for imported used cars, saying they were making a wrong decision.
“The buyers of used cars may spend less initially, but eventually they pay much more in terms of expensive maintenance and low resale value compared to a new car,” he said.
http://tribune.com.pk/story/478485/auto-assemblers-say-cannot-sustain-liberal-import-policy/