Thursday, November 26, 2009

Proton’s profit up from higher sales and bigger mart share

SHAH ALAM: Proton Holdings Bhd reported a higher profit and revenue during its second quarter as the company sold more cars and enjoyed cost savings from the consolidation of its sales and vendor network.

The national car maker, which saw its market share rise to 29% from 26% a year ago, is seeking to ratchet up export sales as it engineers a new cost efficiency programme that aims to bring in an additional half billion ringgit.

“The consolidation effort has given us significant improvement,’’ said managing director Datuk Syed Zainal Abidin Syed Mohamed Tahir when announcing the group’s results yesterday.

For its second quarter ended Sept 30, Proton posted a net profit of RM82.1mil, or 14.9 sen a share, compared with RM43.8mil, or 8 sen a share, in the previous corresponding period.

Datuk Syed Zainal Abidin Syed Mohamed Tahir announcing the group’s second quarter results on Monday. Beside him is CFO Azhar Othman and behind them the Proton logo

Revenue rose 14% to RM2.1bil from RM1.85bil as the company’s sales bucked the industry-wide trend by showing a strong increase.

“Proton has beaten the consensus by a mile,’’ said AmResearch Sdn Bhd analyst Hafriz Hezri.

Hafriz attributed the strong performance to a favourable model mix where larger numbers of the higher margin Exora were sold and also cost gains from the consolidation of the vendor and dealer network.

“Improvement on our operating profit was largely due to the increase in domestic sales volume and profit margins which continued to strengthen through a better product mix,” said chairman Datuk Mohd Nadzmi Salleh in a statement.

“Our domestic sales volume grew by 11% compared with the immediate preceding quarter and this was primarily driven by the increase in sales of our top three models – the Persona, Saga and Exora.’’

The best selling models account for 86% of total sales and demand for the Saga has exceeded initial expectations with the company having to ramp up production to meet the 7,500 bookings a month.

Proton will be exporting the Saga to Australia and Egypt

Apart from better domestic sales, ongoing efforts to cut cost – the latest through the rationalisation of its dealer and vendor network – has borne fruit.

Syed Zainal in the briefing said the cost per unit was down, along with administration and manufacturing charges.

To help cut cost further, Syed Zainal said consultants had been hired to look at the entire process and systems of the company.

Proton is going to spend RM150mil on new systems and information technology infrastructure but aims to reap conservatively RM530mil in EBITDA (earnings before interest, tax, depreciation and amortisation) savings by its 2012/13 financial year.

Proton is also expecting a revenue and profit bump from its partner in China Youngman as the latter starts with its CKD programme.

“As we move forward, volume from China will be more significant,’’ Syed Zainal said.

Apart from expecting gains from the China market, Proton is also seeking export growth from other markets in the Middle East and in the future, India.

“As for export, next month we will be launching the Exora in Thailand, as well as the Saga in Australia and Egypt. Notwithstanding the challenges, the group believes that sales volume prospects will be resilient,’’ said Syed Zainal.

In the pipeline is a global car, where styling and design, along with key components, are done outside of Proton.

Proton is already exploring green technology and aims to launch a fleet programme with the Government where between 50 and 100 of its electric cars would be used by the civil service.

Proton is also looking to develop a new powertrain.

“We will continue to focus on enhancing our returns by investing in the development of new value-for-money products, expansion into key selected markets and the execution of operational efficiency initiatives such as the rationalisation of dealers and suppliers, improvements in quality and capacity optimisation,’’ Syed Zainal said.

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