Proton’s 2Q net profit at RM44m, MD to stay on

SHAH ALAM: 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 RM43.81 million in its second quarter ended Sept 30, 2008 (2QFY09) from RM3.51 million a year earlier.

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

Revenue jumped 40% to RM1.84 billion from RM1.31 billion, 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 RM10.05 as at Sept 30 from RM9.87 on March 31, 2008, while net cash balance more than doubled to RM1.42 billion from RM675 million last year.

For the six months to Sept 30, net profit totalled RM95.84 million versus a loss of RM43.25 million a year earlier as revenue surged 45% to RM3.55 billion from RM2.45 billion. Sales volume rose 35% to 84,565 units in the first half from 62,485 units a year earlier. Operating expenses rose 38% to RM1.84 billion.

Speaking to reporters yesterday, 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% 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”.

Shares of Proton have fallen 51% this year while the main stock index has dropped 40%. The stock added two sen to RM1.80 yesterday.

Changes at Proton

KUALA LUMPUR: Proton Holdings Bhd is expected to see some major changes to its board, possibly involving the managing director’s position as well.

Sources say that several new appointments are likely to be made to the board. Among the names that have cropped up are Tan Sri Ab Rahman Omar and Datuk Abdul Razak Dawood, both of whom were previously with Edaran Otomobil Nasional Bhd (EON).

It is learnt that managing director Datuk Syed Zainal Abidin Syed Mohamed Tahir may leave when his contract expires at the end of next month. Syed Zainal has helmed Proton since January 2006 and has been instrumental in charting the path for the national carmaker in the past two years when a much talked about partnership with Volkswagen AG fell through at the end of last year.

It is said that Ab Rahman may play a more prominent role in the national auto company, considering his years of experience in the industry.

Previously, Ab Rahman was an executive director of conglomerate DRB-Hicom Bhd from February 2006 but left his executive position and was made a non-executive director in December last year. He stepped down from the board in mid-July this year.

Prior to joining the board of DRB-Hicom in December 2005, Ab Rahman was the managing director of Perusahaan Otomobil Kedua Sdn Bhd (Perodua) from May 1996 to April 2004.

He was also a director of Proton from 1991 to 1996 and sat on the board of EON from 1989 to 1996, and was the chairman of the auto distributor from February 2006 to July this year.

Abdul Razak, meanwhile, could be heading Proton’s international operations, says a source.

He was among the pioneers at EON having joined in August 1984 following a stint at the UMW Group. At EON, Abdul Razak was also the general manager of Proton business in mid-2005.

There were quite a few changes on the Proton board and in its senior management in April this year. Among the more prominent names that left were director of manufacturing Datuk Kamarulzaman Darus, and head of engineering Abdul Wahab Mohd Mohamed Khalid.

There were three resignations from the board, albeit all non-executive positions, from November last year. Datuk Mohd Izzaddin Idris left that month, followed by Datuk Ahmad Hashim in February and Mohamad Zainal Shaari two months later.

So far, only one appointment has been made — that of Datuk Zalekha Hassan, who was the deputy secretary- general of the finance ministry. She was appointed in February to replace Datuk Ahmad Hashim.

Khazanah Nasional is the single largest shareholder in Proton with a 42.7% stake but has only one board representative in chairman Datuk Azlan Mohamed. Previously, Khazanah had up to three representatives on Proton’s board, including Azlan.