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November 30, 2008

Malaysia’s Proton reports surge in 2Q net profit

Proton Holdings Bhd, whose managing director Datuk Syed Zainal Abidin Syed Mohamed Tahir’s contract will be renewed, posted a 12-fold rise in net profit to 43.81 million ringgit in its second quarter ended Sept 30, 2008 (2QFY09) from 3.51 million ringgit a year earlier, reported the Edge daily.

The better performance was driven by increased domestic sales and improved margins arising from better product mix and lower discounts.

Revenue jumped 40 percent to 1.84 billion ringgit from 1.31 billion ringgit, while basic earnings per share (EPS) rose to eight sen from 0.6 sen. It declared an interim dividend of five sen per share less tax.

Net assets per share rose to 10.05 ringgit as at September 30 from 9.87 ringgit on March 31, 2008, while net cash balance more than doubled to 1.42 billion ringgit from 675 million ringgit last year.

For the six months to September 30, net profit totalled 95.84 million ringgit versus a loss of 43.25 million ringgit a year earlier as revenue surged 45% to 3.55 billion ringgit from RM2.45 billion. Sales volume rose 35 percent to 84,565 units in the first half from 62,485 units a year earlier. Operating expenses rose 38 percent to 1.84 billion ringgit.

Speaking to reporters Friday, Proton chairman Datuk Mohammed Azlan Hashim said the board had decided to renew Syed Zainal’s contract, but the details of the contract, including the tenure, were still being finalised.

He said Proton’s fifth consecutive quarter of profitability demonstrated its ability to sustain its performance despite the increasingly challenging environment and proved that its strategy of having “the right car, at the right price and at the right time” was working well.

Syed Zainal said as of October this year, Proton’s domestic market share was 33.3 percent with a total of 122,351 units of registered cars since January.

He said domestic bookings for the Persona model had now reached 59,028 units and 91,127 units for the Saga. He said it would continue to focus on high-growth regional markets such as Asean, China, India, the Middle East and North Africa to boost its exports and for economies of scale.

“We had just launched the Persona in the Middle East and GCC markets, namely Saudi Arabia, Egypt and Oman this month while Qatar and Bahrain will receive the model next month. Earlier, we introduced the Persona in Singapore and Indonesia in July, and the Persona CNG in Thailand in October. We also launched the Saga in Brunei last month,” he said.

Syed Zainal said that going forward, the key challenges facing the automotive industry included rising raw material costs, more efficient vehicles coming into the market, possible decline in demand due to higher interest rates among lenders and the velocity in foreign currency market.

“However, Proton has taken steps to mitigate these factors, and we have some near- term initiatives to address the challenges. Some of the initiatives are efficient cash flow management, cost reduction, higher manufacturing efficiency and improved sales and distribution network,” he said.

Asked if Proton could sustain its sales volume given the uncertain economic outlook, Mohammed Azlan said: “We have to be realistic.

“Conditions are getting tougher but not just for us. There is a strong, urgent need to diversify into the international market.”

“While global total industry volume could decline, it does not mean the company cannot grow. The company has to focus on products that are more attractive to the market,” he said.

When pressed further on whether Proton would be able to sustain its profitability, he said: “We would need to play it by ear”.

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