Indus Motor profits slow down

Rising costs turn out to be the speed hump.

KARACHI: Indus Motor, the maker of Toyota Corolla, recorded a 34 per cent decline in net profit to Rs908 million in the first half of fiscal 2010-11 primarily due to higher cost pressures and lower other income.

Manufacturing operations were affected by rising input cost due to depreciation of the rupee against Japanese yen and other inflationary pressures, said the company in a press release.

The result was accompanied by a dividend announcement of Rs5 for every Rs10 ordinary share, according to a communique sent to the Karachi Stock Exchange on Tuesday.

The company’s gross margins declined by 250 basis points to 5.2 per cent in the period under review compared with 7.7 per cent in the first half of 2009-10, according to Topline Securities analyst Furqan Punjani.

Other operating income declined by 11 per cent to Rs760 million compared with Rs857 million due to lower sales on account of floods, said Punjani.

Net sales rise

However, net sales rose 11 per cent to Rs26.8 billion against Rs24.08 billion but the impact was marginal due to the higher cost.

The combined sale of Toyota and Daihatsu brands in the first half ended December 2010 grew by eight per cent to 22,903 units compared with 21,300 units sold in the same period last year.

Sector outlook

With the country’s macroeconomic indices showing some signs of modest recovery, the company expects the second half of fiscal 2011 to be better for the auto industry. However, the earnings will remain under pressure owing to continuous depreciation of the rupee and relaxation allowed by the government in used car imports. The government recently allowed imports of used cars up to five-year-old compared to the previous three- year benchmark, which may drive up competition.

Published in The Express Tribune, February 23^rd, 2011.