SUVs drive Ssangyong to record sales

Written by Rachit Vats | Mumbai | Updated: Jan 5 2014, 05:21am hrs
Ssangyong MotorSsangyong sold a total of 13,271 vehicles up 34% year-on year, including 6,584 in the domestic market (Reuters)
The South Korean Ssangyong Motor, bought out by Mahindra & Mahindra (M&M) in 2010 for R2,105 crore, is on course for its third consecutive quarter of profits after having delivered record domestic sales in November of 6,540 vehicles, a surge of 48.5% from the same period a year ago, and strong December numbers. Ssangyong sold a total of 13,271 vehicles up 34% year-on year, including 6,584 in the domestic market and exported 6,687 vehicles.

The carmaker says the increase in sales was driven by higher demand for sports utility vehicles (SUVs), including the New Korando C and the Korando Turismo. For 2013, Korando C led the way with sales of 107,706 vehicles, 23% higher than in 2012, and comprised 74% of total sales.

Further, Ssangyong Motor has recorded its highest-ever yearly sales in 2013 since 2002.

The company sold a total of 145,649 vehicles, including 63,970 in the Korean market and 81,679 in exports (CKD kits included), in 2013. In India, where it has a small presence as of now, it sells under 200-units of Rexton a mid-sized SUV per month.

Ssangyongs net profit for the April-June period and the July-September period were R37.7 crore and R2.8 crore, compared with a loss of R98 crore and R65.3 crore for the same periods last year. The company delivered revenues to the tune of R4,510 crore, a jump of 34.9% on a year-on-year basis for April-June quarter and R4,674 crore, a jump of 37.9% on a year-on-year basis for the July-September quarter.

Post the M&M acquisition, Ssangyong trimmed workforce by 40%. It has about 7,400 employees from 4,500 heads four years ago.

Of its many subsidiaries, Ssangyong Motor currently contributes 22% to M&Ms topline and is looking at expanding business further in the domestic as well as overseas markets. In the pipeline are plans to increase export volumes in Russia, India and enter newer markets such as South America, Africa and the rest of Asia, according to company insiders.

The potential of Ssangyong is undeniable. However, for the company to make a meaningful impact on M&M financials, it would have to significantly improve its operating margins, launch products, grow volumes and manage costs for a sustained improvement in Ebitda margins, said Aashiesh Agarwaal, head (research), Edelweiss Financial Services.

Ssangyong, which currently has a small portfolio of products and presence in only limited geographies, has seen its operating margin remain negative since fiscal 2008.

Both M&M and Ssangyong are known to be sharing synergies and working on newer models, say sources within the company. Over the next decade, Ssangyong will be in a growth phase and likely to invest significantly into product development and thus the companys cash flow generation is likely to remain limited only sufficient to cover Ssangyongs requirements at best.

Ssangyong has already received a R450 crore capital infusion from parent Mahindra in fiscal 2013.

An email sent to VS Parthasarathy, group CIO and EVP, group M&A, finance and accounts, did not elicit response at the time of filing this story.