Proton, Lotus eye return to profit in FY16

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SHAH ALAM: National carmaker Proton Holdings Bhd, a unit of DRB-Hicom Bhd, expects to turn its sports-car unit Group Lotus plc and itself around by the financial year ending March 31, 2016 (FY16).

Proton chief executive officer Datuk Abdul Harith Abdullah said the turnaround will be driven by improved sales and after-sales services, cost optimisation as well as establishing a “long-range product plan” to offer a variety of models up to 2019.

“I have to admit that we recorded our lowest [sales] performance last year. But that did not deter us from moving forward. Based on our plan, I am optimistic that the road to recovery will materialise by FY16,” Abdul Harith told The Edge Financial Daily, after a visit by Deputy Finance Minister Datuk Ahmad Maslan to Proton’s centre of excellence complex here last Friday.

In September 2013, former Proton executive chairman Tan Sri Mohd Khamil Jamil had said the management had expected Lotus to become profitable in two to three years.

Proton saw its net loss in FY13 widen to RM821.4 million from RM606.3 million in FY12. Lotus’ net loss in FY14, meanwhile, narrowed to £71 million (RM384 million) from £867 million the previous year.

The poor results by Proton pulled down its parent DRB-Hicom’s financial results for the nine months ended Dec 31, for financial year 2014 (9MFY15), which saw the segment profit for its automotive division plunge 57.8% to RM64.28 million from RM152.44 million in 9MFY14.

 Abdul Harith said Proton’s sales of its eight models are expected to grow to 130,000 units this year, up 12.28% from 115,783 units in 2014. This will be driven by its Iriz and Saga models, as well as lower car prices stemming from the implementation of the goods and services tax on April 1.

“We recorded dismal sales last year, perhaps the worst performance ever. But sales last month (March) has surpassed 10,000 units. If we keep the momentum going, we should be able to reach 130,000 units this year,” he said.

Abdul Harith added that Proton sold some 30,000 cars in the first quarter of this year. Sales in January and February registered 8,900 units and 8,254 units respectively.

On Lotus, Abdul Harith expects sales to achieve 3,000 units this year from some 2,000 units in 2014, boosted by the recently-launched Evora model at the International Geneva Motorshow early last month.

“I am positive on the performance of Lotus. We are seeing demand grow for the new Evora, which has reached some 400 bookings to date,” he said, adding that Lotus opened nine new sales offices in Germany, France, Iran and the Philippines to drive sales.

Currently, Lotus sells three models — Elise, Evora and Exige — all of which are produced at its 150-acre (60.7ha) plant in Norwich, the United Kingdom. The plant has a manufacturing capacity of 10,000 cars per year.

Abdul Harith noted that current production has stabilised to 40 cars per week, from 20 to 30 cars per week previously.

On Proton’s manufacturing capacity, Abdul Harith said the two plants located here and in Tanjung Malim, Perak are currently utilised at slightly above 50% of the total capacity.

The production plants have an annual capacity of 200,000 units and 150,000 units respectively.

 “We have the remaining capacity to fill. What this means is that we can accommodate more demand and volume, especially from the domestic market,” he said.

Abdul Harith declined to reveal Proton’s capital expenditure for FY15, but it was previously reported that it could cost some RM1 billion which will be used to enhance its manufacturing capability and reduce product development costs that would be based on common platforms.

As for exports, Abdul Harith said Proton sold 5,000 cars in the Middle East last year, with the Persona being the most popular model in the region.

He said that Proton is building more brand awareness abroad, so that it can grow its export volume to at least 10% of total revenue from a “small” percentage now.

“We are still reassessing our export strategy to see whether there is enough demand that will drive the volume. At the same time, we have to be mindful of the volatile currency exchange,” he said.

On its collaboration with Indonesia’s PT Adiperkasa Citra Lestari, Abdul Harith said it will be finalised in the next six months, pending conclusion of a feasibility study as well as confirmation of equity structure and investment commitment.

“At the moment, we are exploring potential collaborations. We will inform you once we have firmed things up,” he said.

On Feb 6, 2015, Proton signed a memorandum of understanding with PT Adiperkasa to collaborate to develop and manufacture Indonesia’s national car, or an Asean car.

DRB-Hicom bought over Proton from Khazanah Nasional Bhd and other shareholders for RM2 billion in 2012.

 

This article first appeared in The Edge Financial Daily, on April 6, 2015.