ANALYSTS are cutting their fourth quarter sales forecasts for Perusahaan Otomobil Nasional Bhd (Proton) on the back of an expected weaker car market, and downgrading the company's longer term prospects following the possibility that the launch of new models by the national car maker will be delayed.
The revisions follow Proton's disappointing third quarter results to Dec 31, 2002, announced on Monday, with sales dipping 20% and net profit down by 48%.
Affin-UOB Securities Sdn Bhd, which described the latest Proton results as “operationally below expectations”, said delays in consumer purchases due to expected budget measures coupled with a slowing economy and weaknesses in the second-hand car market were to blame for the company's lower third quarter sales.
OSK Investment Research said lower sales volume and a higher Japanese Yen rate resulted in a margin squeeze. “It was a double whammy for Proton,” it said.
Warning of worse to come, Affin-UOB yesterday trimmed its forecast of the company's full year sales volumes to March 31 by 6% and downgraded its earnings per share (EPS) by 11%. “We believe the soft market for the car market is likely to persist in the fourth quarter,” it said.
UT Securities Sdn Bhd agreed, saying fourth quarter sales for Proton would remain stagnant due to the Chinese New Year holiday period in February.
Further, Affin-UOB added, the situation would not be likely to improve in the medium term. The securities house said it was cutting Proton's financial year 2004 and 2005 sales forecasts by 16% to 203,900 units and 19% to 204,510 units respectively in light of the delay in the launch of Wira and Tiara/Satria replacements made by the Proton-made Campro engine. The launches, originally slated for end-2002 or early-2003, have now been set back by at least a year, according to Affin-UOB, which has also reduced Proton's FY2004-2005 EPS by 26%.
OSK Investment Research said it was slashing EPS estimates for Proton by 4% to 170.9 sen on weaker sales volume and higher costs. It said that Proton’s sales would be affected by the delay in launching new models and lower consumer spending.
OSK said sales of new vehicles were starting to feel the full brunt of lower spending by consumers and concerns over job security could force them to defer spending on big-ticket items.
However, it added that the government's decision to delay market opening under Asean Free Trade Area (Afta) would be “a big plus” to Proton. “This gives the company another two years to beef up its operations to the world standard,” it said.
The research house, nevertheless, also chose to revise downwards the company's sales growth for 2004 and 2005 to 2% from 3% previously.
OSK said a stronger Japanese Yen might adversely affect future results, as it had done in the last quarter, but this would be offset by lower research and development spending and cost savings from the greater use of local materials in Proton cars.
However, it added, the delay in the launching of the Wira replacement “would not augur well for Proton as this could mean its financial performance would continue to trend south.”
Proton shares were also among the top losers on the KLSE yesterday, shedding 20 sen to close at RM8.20 per share.
