Tuesday, November 12

Proton domestic sales to stay flat in FY12, earnings likely to be lower

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KUCHING: Proton Holdings Bhd’s (Proton) domestic sales volumes for the  financial year 2012 (FY12) are expected to stay relatively flat, given that its Turbo MPV has been delayed till end-2011 and Persona replacement is slated for launch only in the first quarter of 2012 (1Q12).

On the financial front, the group was expected to report lower 1QFY12 earnings on a year-on-year (y-o-y) basis, said RHB Research Institute Sdn Bhd (RHB Research) in a research note yesterday.

Although Proton’s domestic sales volume for the quarter to June was up by 0.9 per cent y-o-y to 40,353 units, earnings were likely to be dragged lower by expenses associated with the ongoing turnaround programme (LTP) at 100 per cent owned Lotus Group.

The programme, budgeted at £480 million (RM2.36 billion), involved the rationalisation of its dealer network, rebranding activities, expansion of production facilities and investments in five new models that would be gradually introduced from 2013.

On the other hand, the receipt and recognition of research and development (R&D) grants could also skew earnings for the quarter.

To recap, Proton reported FY11 net profit of RM152.1 million after recognising R&D totalling RM222 million for the year.

“Although domestic registrations fell 10.1 per cent quarter-on-quarter (q-o-q), Proton generally fared better than Perodua and other non-national marques during the quarter. The Japan earthquake and tsunami left Proton relatively unscathed although sales of the Inspira declined 44.5 per cent q-o-q to 1,900 units,” highlighted RHB Research.

Among the key metrics to look out for in the results announcement included consolidated losses at Lotus Group, R&D grant income accreted, export sales volume as well as gross cash and gross debt. The latter would given an indication as to the pace of drawdown of the £270 million (RM1.33 billion) syndicated loan by Lotus.

On the investment front, RHB Research said the multi-year LTP was a significant risk for Proton, being predicted on sufficiently strong domestic earnings to maintain cashflow, combined with a favourable macroeconomic environment when Lotus began its launch programme in 2012 with the Esprit.

“The lack of clarity on the financial implication of the LTP on Proton will also continue to cloud investor sentiments,” it opined. No dividend was expected as Proton continued to prioritise the conservation of cash.