The Pak Suzuki Motor Company (PSMC) – the biggest auto company of the country by market share – has reported profit after tax of Rs980 million for the calendar year 2012 (CY12), up 23% if compared to Rs796 million reported for the preceding year.

The earnings per share of the company increased to Rs11.88 in CY12, compared to Rs9.65 in CY11. The company has announced a final cash dividend of PKR2.5 per share for CY12.Notwithstanding the 23% increase in profitability, analysts say that the results will be disappointing for the company.

“I think the annual results will be disappointing for Pak Suzuki because its profitability grew handsomely, but losses in the last two quarters spoilt the show,” said Atif Zafar, analyst at JS Global Capital, a brokerage house.The company’s sales declined with the discontinuation of the Alto model, which has also hit its profitability, he said.

Growth drivers for Pak Suzuki were a volumetric increase in sales due to a Punjab government taxi scheme, and a 9% increase in car prices for the outgoing year, BMA Capital said in a research note issued on Thursday. The Punjab government had allocated Rs4.5 billion in the fiscal 2012 budget to provide 20,000 yellow cabs to youth in the province.

However, import of used cars, discontinuation of the Alto and increased cost of production owing to the additional input cost of electronic fuel injection (EFi) technology has restricted the profitability of company, it added.Against ours and the market’s expectation, the fourth quarter (4QCY12) failed to show any recovery, as the company posted loss after tax of Rs189 million on the back of lower volumes,” the report said.

Like other car assemblers, sales of Pak Suzuki have also taken a hit in CY12, but Pak Suzuki felt the fallout of increased imports of used cars in the second half of CY12, with the discontinuation of Punjab Taxi Scheme in the middle of the year.

On the volumetric front, Pak Suzuki sold 96,228 cars in CY12, as compared only 92,342 in CY11, up by 4% year-on-year. The Punjab taxi scheme was the prime reason behind the boost in volumes in the first half of CY12. Perhaps this is why 3QCY12 witnessed a decline of 35% in volumetric sales of the company, said research notes.

Pakistan imported around 55,000 used cars in fiscal 2012, which dented sales of local car assemblers. But what is disturbing for car assemblers is that their sales are still depressed, even after a government decision in December 2012 that cut the age limit of imported used cars from five years to three years.

According to car importers, Pakistan has already imported over 40,000 used cars in the first eight months of fiscal 2013 – enough to scare the local auto industry, which feels deeply threatened by its only competition.