Two years after Mahindra & Mahindra (M&M) acquired South Korean sports utility vehicle firm SsangYong Motor Company (SYMC), the latter is still to make profits, although overall volumes have improved.
On Tuesday, SYMC announced provisional December quarter numbers wherein it said its net loss trimmed to South Korean won (KRW) 40.14 billion (R198 crore) against KRW 44.75 billion (R221 crore) during the same period last year. The operating loss reduced to KRW 301.92 billion (R158 crore) to KRW 36.32 billion (R179 crore) compared with the same period last year.
Provisional revenues of the company is seen at 811.39 billion KRW (R4,005 crore) against KRW 676.89 billion (R3,341 crore). Last year, the company sold a total of 120,717 units, including 47,700 domestic and 73,017 exports.
However, on quarter-on-quarter, the company’s losses widened from September quarter of KRW 13.43 billion (R66 crore), suggested Bloomberg data.
Gloomy global economy at large is seen as the major reason for the impact on the profitability of the company. Exports make around 60% of SYMC’s sales and the company has been on an internationalisation drive to enhance its exposure to export markets. While European region has been its focus, of late Russian market has ushered to become its first single market to see more than 30,000 units export number.
An auto consultant on condition on anonymity said, “SYMC has had a difficult history due to labour issues and its earlier owners looking at it as a platform to get technology with no significant investments made by them in product lineup.” He added that M&M would initially face hiccups to make profits on its Korean acquisition but in long term it would be able to improve product line up in the next 10 years.
Currently, SYMC makes 7-8% of the M&M revenues. M&M had taken controlling stake in SYMC in March 2011 and is reportedly looking at raising its stake in SYMC to 72.85% with an investment of KRW 80 billion (R395 crore).
M&M is likely to subscribe to preferential shares issued by SYMC to facilitate product development and strengthen the South Korean company’s financials, suggested a report. The payment is expected to be made on May 22.
Pawan Goenka, president (automotive and farm equipment sectors), M&M, in an investor call had said that over the next three years, it will be launching three all new products. One of which is along with SYMC R&D. M&M said, “It hopes SYMC sales