Tan Chong Q1 profit falls 57%
Stock constraints, Bank Negara lending guidelines drag earnings down
PETALING JAYA: Tan Chong Motor Holdings Bhd’s net profit for its first quarter ended March 31, 2012 fell 57% to Rm31.67mil from Rm74.08mil in the previous corresponding period due to stock constraints in popular models.
Revenue, meanwhile, dipped to Rm982.6mil from Rm1.13bil.
The company told Bursa Malaysia yesterday that the lower earnings were also attributed to the new responsible lending guidelines that was imposed by Bank Negara this year.
“Credit growth is tighter compared to a year ago as per Bank Negara policy guidelines and we had to work harder and campaign
(Tan Chong) is still reeling from the earthquake and floods last year and the tedious documentation process under the new hirepurchase rule is prolonging the car-buying process. — AN ANALYST
more to cushion lower loan approvals and a weaker used car market,” it said, adding that operating margins fell from 9.5% to 5.2% “in an intense market place.”
“Earthquakes, floods, tighter credit have significantly cut supply and demand,” the company said.
An analyst from a local bankbacked brokerage said the company’s earnings were “more or less within expectations.”
“It is still reeling from the earthquake and floods last year and tedious documentation process under new hire-purchase rule is prolonging the car-buying process.”
Under Bank Negara’s responsible lending guidelines, which was implemented on January 1, loans are now approved based on net income compared with gross income previously.
The new guidelines are intended to help manage the household debt in Malaysia to reasonable levels.
However, the new stringent rules have resulted in some potential car buyers finding it more difficult to get their loans approved.
This, meanwhile, is having a direct impact on the sales of local automotive companies, especially those within the lower capacity passenger vehicle segment.
Another analyst said Tan Chong’s earnings were slightly below expectations, adding however that he expects an improvement in the company’s sales going forward.
“We expect to see a normalisation in component supplies and car companies are also slowly starting to adapt to the central bank’s lending guidelines,” the analyst said.
Tan Chong meanwhile said the negative impact on its earnings should not be viewed negatively.
“The slowdown itself, however, should not be viewed as a bad thing. “Our company is extending its geographic reach regionally and our product pipeline is broadening to address a larger and more integrated Asean.
“We are building a robust and more geographically dispersed supply chain in Indochina, which has led to higher intrinsic cost increases to cover a wider footprint,” it said.
Barring unforeseen circumstances, the company said it expected its vehicle sales to exceed the industry growth, especially with the planned launch of a B-segment sedan (a segment that Tan Chong is currently unrepresented in) and the introduction of selected completelybuilt- up models that were already “selling well in various Asean markets.”