Proton reports loss as cost of steel climbs
Bloomberg News
September 1, 2005
Chan Tien Hin and Katherine Espina 

KUALA LUMPUR Proton Holdings, Malaysia's biggest carmaker, has reported its first loss in six quarters, citing surging component costs and higher provisions for doubtful debt.
 
The net loss was 12.4 million ringgit, or $3.3 million, in the three months that ended in June, from profit of 166.5 million ringgit a year earlier, the company said Tuesday. Sales rose 6.8 percent to 2.05 billion ringgit.
 
The state-controlled Proton, which is seeking to develop cars with Volkswagen this year, is struggling to introduce new models to keep pace with offerings by Toyota Motor, Honda Motor and Kia Motors in South Korea.
 
Proton last June began selling its first new model in 16 months, the 1.2 liter Savvy compact car, part of a plan to sell three new models in 2005 to stop a five-year drop in its share of Southeast Asia's biggest passenger-car market.
 
The Savvy has not sold well compared with Perodua's Myvi model, said Eltricia Foong, an analyst at Hwang-DBS Vickers Research in Kuala Lumpur. Proton will "find it difficult to meet its in-house sales target of 50,000 a year," Foong said.
 
Proton shares closed unchanged at 8.85 ringgit Tuesday. The stock has fallen 1.7 percent this year, compared with the 0.7 percent rise of the benchmark Kuala Lumpur Composite index. Malaysia's stock market was closed Wednesday for a public holiday.
 
Proton made a 91 million ringgit allowance for debt that it said might not be recovered, without giving details or comparable numbers from last year. Expenses for research and development were 136.9 million ringgit for the quarter, without a comparison from last year.
 
"The group expects the higher component cost arising from higher steel and oil prices to have an adverse impact on margins," Proton said in a statement. "Intense competition in both domestic and exports market is expected to put additional pressure on sales."
 
Proton's new vehicle competes with Hyundai Motor's Atos and Picanto models as well as those by Perusahaan Otomobil Kedua Nasional, or Perodua, in the fastest-growing segment of the automotive market. Perodua introduced the new 1-liter Myvi in May and has sold more than 50,000 units, analysts said.
 
Proton last month promoted two executives to replace Mahaleel Ariff as head of the company. Kamarulzaman Darus, head of its Tanjong Malim unit in northern Malaysia, and Kisai Rahmat, director of operations, were named as joint chief operating officers, Proton said.
 
Mahaleel, chief executive of Proton since 1997, went on leave in July and his contract will not be renewed when it expires in September, Proton said.
 
Mahathir bin Mohamad, Malaysia's former prime minister and adviser to Proton, had blocked a plan in January to fire Mahaleel. Mahathir said July 26 that Mahaleel did not agree to the terms offered under a renewed contract.
 
Competition in Malaysia's car market intensified after the government slashed import duties on vehicles made in countries of the Association of Southeast Asian Nations last year under a regional free-trade agreement.

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