PSMC: LPS of
The drop in earnings was on account of (1) volumes declining by 36% YoY, and (2) massive jump in finance costs (+320% YoY) as the company resorted to bank borrowing for its liquidity requirements. The company managed to reduce its distribution costs by 47% YoY, which helped reduce the pressure on the bottom line. Finally, the loss during the quarter would have been greater, had it not been for tax reversal during the quarter.
On a QoQ basis, the company managed to cut its losses, which was likely on account of price increases in the Suzuki Alto variant which accounted for nearly half of total volumes for the quarter. Resultantly, the company returned to gross profitability with gross margins of 3.1% in 4QCY19, compared to a gross loss in 3QCY19.
Given the current pandemic scenario, where all auto companies have closed down their production units, it appears that volumes might drastically reduce in the next month at least. On the other hand, oil prices are heading towards
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