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Pak Suzuki profit rises two-fold in first quarter

KARACHI (April 29 2003) : Pak Suzuki Motor Co, the country's largest auto assembler of Suzuki cars, said profit rose two-fold in the first quarter ended March 31 as buyers took advantage of lower lending rates.

The net profit rose to Rs 385 million from Rs 149 million in the same period a year earlier, the company said in a statement to the Karachi Stock Exchange.

Sales rose 74.18 percent to 4.095 billion rupees from a year-earlier.

The State Bank, the central bank, cut its benchmark-lending rate by 1.5 percentage point to 7.5 percent in November 2002, prompting banks to lower retail lending rates.

“Sales grew as some of the banks are providing loans in single digit as much as 9 percent from 22 percent two years back,” said an analyst.

“Due to increase in production caused by the persistent demand, favourable exchange rate, earning from huge advances deposited by customers, and reduction in cost of production owing to increased deletion levels, we expect the auto sector to perform tremendously during 2003 also,” he said.

Pak Suzuki shares gain Rs 2.55, or 3.9 percent, to Rs 76.30 at the Karachi Stock Exchange on Monday.

The auto industry, one of the most heavily protected industries of Pakistan, has been performing well since the rapid and aggressive entry in auto financing by different financial institutions because of declining interest rates.

The situation now is such that banks, such as Bank Al-Falah and Standard Chartered, are offering car financing at 9.5 percent and 8.5 percent respectively.

One other factor also continues to support auto assemblers' margin for more than a year.

The rupee appreciation against the yen after September 11, 2001 events has reduced raw material costs in rupee terms. The company's three-month earnings.

===================================================================                                    2003           2002        Change                                   Jan-March    Jan-March        (pc)                                                In millions of rupees  ===================================================================  Sales                                4,095         2,351      74.18  Cost of sales                        3,455         2,094      64.99  Financial and administrative Exp.       99            69      43.47  Profit after tax                       384           149          -  ===================================================================

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