Proton to invest RM1.6b on capex FY12

SUBANG JAYA (May 26, 2011): Proton Holding Bhd, which made a net profit of RM61.64 million in its fourth quarter ended March 31, 2011(Q4), will invest RM1.6 billion in the current financial year on capital expenditure (capex) at home and at UK-based Lotus Group.

This is significantly higher than more than RM900 million spent on product development and facilities expansion made in FY11.

"This will be a big capex year for Proton. We are investing in the future," group managing director Datuk Seri Syed Zainal Abidin syed Mohamed Tahir said at a briefing yesterday.

He said the capex budget will be split in the middle between Proton and Lotus.

Proton is targeting to launch a new car next year, and is developing a Malaysian made alternative fuel propulsion system vehicle.

The company had obtained a government grant of RM270 million to pay for the research and development for this green vehicle.

Proton will deliver the first 30 units of hybrid as well as electric vehicles to the government next month.

Commercial rollout could happen as early as 2012.

Meanwhile, Lotus will require heavy investment to pay for its turnaround and development of new models targeted to be out by 2013.

Also in the pipeline is a plan to develop a "global small car" in what would be the first joint development between Proton and Lotus. No actual timeline for the project was given.

Syed Zainal said the increase in the capex will not affect Proton financial position. Proton' cash balance stood at RM1.2 billion as at end-March.

The recovery, from below RM1 billion at the end of 2010, was propelled by improved inventory management at the group that also resulted in better performance.

For FY11, Proton made net profit of RM152.14 million on revenue of RM8.98 billion. Total sales volume reached 162,950 units, with exports up to 27,905 units.

"Obviously we are looking at further growth this year, but we are mindful of the challenges," Syed Zainal said.

Proton is also adopting a different strategy to boost exports sales.

"The CBU approach cannot exist anymore, particularly for big markets like China and India," he said.

He said the group is in "heavy discussion" with potential partners to set up assembly plants in pre-identified markets, like China, India and Iran.

With Lotus not expected to break even any time soon, Proton would have to continue to rely on its home market, Malaysia.