KARACHI: After more than 3 years, Dewan Farooque Motors Limited (DFML) restarted production in the October-November quarter of 2013, indicating a reprieve in the credit woes of the automobile firm which claims to be a victim of the global financial meltdown.

It announced a net profit of Rs47.4 million on Thursday for the second quarter of the current fiscal year, following 12 successive quarters of losses during which the plant remained shut most of the time.

Losses for the six-month (July to December 2013) period were down 79% to Rs13.784 million compared with the corresponding period of 2012.

Financial statements released to the stock exchange showed net sales of Rs511 million, most of which were concentrated in the second quarter. Sales have not seen such levels since fiscal year 2010.

LEVERAGED
Rs45b
is the debt of the entire group, accourding to bankers

There was no immediate word from the company on reasons behind the sudden jump in sales, but industry sources say it was an indication that Dewan Yousuf Farooqui, the chairman, has settled the most pressing issues with the banks.

“The company already had 800 to 1000 completely knocked down (CKD) kits lying at the plant,” said an industry official. “All they needed was working capital to run the machines.”

DFML has the rights to manufacture and market Hyundai and Kia vehicles in Pakistan, making it the only company to introduce non-Japanese vehicles.

The maker of cars like Santro and Shehzore truck was struck by a debt crisis which hit Dewan Group − the conglomerate involved in products ranging from synthetic fibre to cement.

Banks have filed suits of up to Rs7.2 billion against the DFML in various courts. The company is contesting the cases.

The first Kia Classic 1,300cc sedan car rolled out of the DFML plant located in Sujawal on January 15, 2000. With a project cost of Rs1.834 billion, it marked the beginning of an era which saw Dewan Group diverting from its core business in textiles and fibres.

With the capacity to produce 10,000 vehicles a year, the company also boasts being the first to use a robotic paint shop in Pakistan.

The company produced 95,429 vehicles between 2000 and 2011 which included Kia Spectra, Sportage and Hyundai’s Santro. But with sales of over 50,000 units, the Shehzore truck was its premium product.

“It sold like a hot cake,” said a former executive of the company. “To this day, there is no truck in the one-ton category that has replaced Shehzore.”

DFML was launched at a time when banks were expanding operations and low interest rate encouraged consumer financing schemes including those allowing people to buy cars on easy installments.

As the global financial crisis unravelled in 2008, cash-strapped Pakistani banks tightened the noose around Dewan Group.

“What they didn’t realise was the fact that Dewan needed money for the working capital. It was not like their products weren’t being sold,” said a former executive. “It was one bad patch which would have passed easily.”

However, other people say that the group had taken too much debt for non-core businesses.

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