PROTON Posts Profit of RM4.95 Million in Q2 2007

Focus on Operational Efficiency and Costs Management Yields Positive Results

SHAH ALAM, 30 November 2007 – PROTON Holdings has announced a profit before tax of RM4.95 million in the second quarter ended 30 September 2007.

This is a significant improvement compared with the pre-tax loss of RM240.48 million registered in the corresponding period last year. In the preceding quarter ended 30 June 2007, PROTON recorded a pre-tax loss of RM46.85 million.

The better results were registered on the back of higher revenue of RM1.31 billion from RM1.27 billion in the corresponding period last year.

Correspondingly, net profit after tax was RM3.51 million against an after tax loss of RM250.34 million previously.

As a consequence of the better showing in Q1 and Q2, PROTON registered a markedly lower pre-tax loss of RM41.90 million in the first six months ended 30 September 2007 against a pre-tax loss of RM336.02 million in the corresponding period last year.

“This improvement in financial performance over the result posted in Q1 of financial, year ending 31 March 2008 is a direct result of increased sales (34,320 units for Q2 compared to 28,145 units or 22% increase) and better cost management,” said PROTON Chairman Dato’ Mohammed Azlan Hashim.

“PROTON is committed to continuing and accelerating initiatives to bring about operational improvements. The Group will continue to deliver on its promise of manufacturing and selling the right car, for the right market, at the right price,” Mohammed Azlan added.

The Malaysian automotive industry environment is expected to remain challenging as the total Passenger Car industry volume for the first nine months of 2007 declined by 3% compared to the corresponding period last year.

The domestic macroeconomics and industry related factors such as lower trade-in values coupled with anticipated year-end slowdown are expected to continue to limit year-on-year growth in passenger car industry volume. Nevertheless, the passenger car industry volume has shown month-on-month improvement since mid-2007.

With regards to the negotiations proposed on strategic alliance, Mohammed Azlan added that PROTON takes note of the shareholder decision not to proceed with the negotiations at this time. Despite some concerns being expressed by various parties, PROTON believes their decision would have been taken after careful consideration of all material facts. PROTON on its part will continue to work closely with all its stakeholders to improve itself, especially in the various areas of operations, financial condition and corporate structures.

“Going forward, PROTON will also continue to emphasise the elevation of the nation's automotive eco-system, both upstream and downstream, in line with the nation's aspirations, both at the vendor/supplier and dealer/customer service ends.”

PROTON will continue to observe its philosophy of ‘the right car, for the right market, at the right price’ and strive to ensure its loyal customers continue to be able to 'experience' new, value-for-money, improved-quality and exhilarating products going forward. However, given the past, PROTON will have to carefully manage its customers on its quality perceptions to regain public confidence.

“The PERSONA is an early indication that PROTON has begun to meet the expectations of the market, given its cumulative bookings of about 23,000 units within four months of launch. We expect the upcoming new model (“BLM”) to be also warmly received by the Malaysian public,” said Mohammed Azlan.

PROTON is committed to continuing and accelerating initiatives to bring about operational improvements. Whilst there are no quick fixes in improving and strengthening PROTON, its domestic market share is clearly improving. PROTON also continues to view exports as the way forward for the company and is keenly pursuing to enhance its export performance by pursuing a more focused export strategy, targeting key markets with sustainable growth such as ASEAN, China and India.

PROTON will explore innovative ways to expand its revenue base and manage costs. PROTON is learning to optimise all assets available to it and expand its businesses through technology sales, valuable intellectual property as well as pursuing the possibility of generating additional revenue from available capacity and capabilities.

“It only makes good commercial sense to maximise all the revenue potential of its assets,” added Mohammed Azlan.

PROTON Managing Director, Dato’ Syed Zainal Abidin Mohamed Tahir said that despite a challenging domestic environment, encouraging market response for the Persona model has positioned PROTON to record further improvements as shown by passenger car market share trend, moving from 26.5% in the preceding quarter to 33.1% in the current quarter.

PROTON car sales for the current quarter rose to 34,340 units, up from 28,145 units in the preceding quarter and 33,861 units in the corresponding quarter last year.

“This trend is expected to be strengthened with the anticipated introduction of a new entry level sedan for the domestic market in the last quarter of this financial year,” he added.

The improving performance resulting in reduced inventory is also generating an increase in cash balances.

Given the increasingly competitive market situation, a stronger dealer network is key for the company to move forward. The stronger dealer network enables PROTON to better focus, provide better customer service and posture positive brand perception.

“As of today, the dealer rationalization process has resulted in a stronger network, demonstrated by a 47% increase in average monthly sales per dealer,” said Syed Zainal Abidin.

“At the same time, signs of improved quality were significantly demonstrated through PERSONA, in which the in-house quality control are further enhanced and stabilized in the first three months of launch,” he added.

On the international business front, despite uncertainties on global growth driven by the sub-prime turmoil, the Group is continuing to focus on growing its export volumes in its core markets and ensuring the successful execution of the Jinhua Youngman Automobile Manufacturing Co Ltd technology and vehicle sale transactions.

“The business arrangement with Jinhua Youngman to export 30,000 units of CBU Gen2 beginning November this year and the securing of an order of up to 5,000 units of WAJA to be used as taxis in Iran shows that PROTON can make inroads abroad,” Mohammed Azlan said

“In the last one year, it has begun to expand its ASEAN operations with the launching of the brand in Indonesia in March 2007 and more recently in Thailand. The ASEAN region will be key to PROTON’s export strategy in the coming years,” he added.

PROTON cars are currently exported to four key regions – ASEAN, the United Kingdom, Australia and the Middle East including South Africa and Taiwan.

“A strong domestic order book, an anticipated launch of a new entry level model, aggressive stance on exports and continued execution of cost reduction initiatives will hold the Group in good stead for the rest of the financial year,” added Syed Zainal Abidin.

Source: PROTON

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