KUALA LUMPUR -- Malaysia's top car maker, Proton, announced plans for a major reorganization on Tuesday, which some analysts saw as a surprise move to pave the way for a new foreign partner.
The state-controlled Proton (Perusahaan Otomobil Nasional Bhd) said it would establish a new investment holding company to take over its listing status, while posting a 1.8 percent rise in earnings in fiscal 2003, beating a market consensus forecast.
"The reorganization will allow Proton to seek new areas of growth...especially with the resources available to us such as the 100 percent owned Lotus," Chief Executive Tengku Mahaleel Tengku Ariff told a news conference, referring to the British sports car maker Proton took over in the 1990s.
Proton said existing shareholders could exchange their shares on a one-for-one basis for shares in the new company.
"It looks like they are paving the way for the entry of a joint-venture foreign strategic partner into the to-be-taken-private Proton," said Choo Swee Kee, a fund manager at KLCS Asset Management.
"The new structure is more streamlined and makes it easier for joint-ventures to take place," said Loo Kar Weng, an analyst at DBS Vickers.
The maker of Proton cars has around a 60 percent share of Malaysia's car market. Government-linked investors hold a 49 percent stake in the company and Japan's Mitsubishi has a 15.9 percent stake.
Proton, which has benefited from protective tariffs, must prepare to take on foreign rivals without government protection.
Under AFTA, Southeast Asia's free trade pact, Malaysia has agreed to slash import tariffs on foreign car brands from up to 300 percent currently to between zero and five percent by 2005.
In 2000, Malaysia said it would look for a possible foreign partner for Proton, but found no takers at that time, and the company has been in a race to build up volumes to levels where it can benefit from the economies of scale needed for it to survive.
Cost saving measures dampened the effects of falling sales, as turnover fell to 9.27 billion ringgit ($2.44 billion) in fiscal 2003, down from 10.31 billion ringgit the previous year.
Net profits were 1.14 billion ringgit ($299 million), or 2.07 ringgit per share, in the year ended March 31. Last year, net profits were 1.12 billion ringgit, also 2.07 ringgit per share.
The fiscal 2003 results beat Reuters Research's net profit consensus forecast of 952 mln ringgit or earnings per share of 1.742 ringgit.
Sales have dropped in the early months of 2003 at the same time as carmakers such as Japan's Toyota and Honda have cut showroom prices of models to pitch them directly at Proton's flagship Waja model.
Malaysian motor vehicle sales fell for the third straight month in April as consumers held back in the face of uncertainty over what will come when the country's auto industry joins AFTA, the region's free trade area, in 2005.
The bulk of the 10.6 percent year-on-year fall to 34,322 units in April came from lost sales by Proton and the second national carmaker Perodua, which dropped a combined 15 percent of their sales for the month.