Shares in Proton – the parent company of Group Lotus – have fallen to a 14-month low after the company posted losses in the third quarter of 2010.
According to a report in The Star
, analysts OSK Research have blamed much of the current problems on the money being invested in Group Lotus.
The company will act as title sponsor of the Renault F1 team for the 2011 season onwards in a move which is set to reduce annual profits for the parent company with the possibility that Proton's earnings could become 'strained' in the short to medium term.
“Management also reiterated that over the immediate to medium term, Proton will incur more expenses for the restructuring of Lotus, which will see branding and marketing costs, including its F1 foray, swallow up 15mil to 20mil per annum,” OSK said. “Furthermore, over the course of the next few years, capital expenditure spending of an average of RM800mil to RM1bil will be incurred for Lotus' business transformation plan and R&D (research and development) for the local side, for which funding will be predominantly raised from debt.”
Proton advisor Dr Mahathir Mohamed admitted that the need to restructure Group Lotus has played a part in the company posting a third quarter loss, but said the company would still be in a position to turn an annual profit.
“Proton is not running at a loss,” he told the Bernama
agency. “It's actually profitable but its profit has been trimmed because of the losses incurred by Lotus. Before we undertake to restructure, there will definitely be losses.”