Corporate results: Indus Motor announces profit of Rs5.9 billion

Earnings during July-December up 90% year-on-year

KARACHI: Indus Motor Company - the makers of Toyota Corolla in Pakistan - posted a net profit of Rs5.9 billion in the first half (Jul-Dec) of fiscal year 2015-16 (1HFY16), up 90% from Rs3.1 billion recorded in the same period of the previous year.

Earnings per share (EPS) jumped to Rs75 from Rs39.99 in the period under review. However, the company’s earnings recorded a lower growth in the second quarter of FY16 (Oct-Dec), amounting to Rs2.96 billion compared to Rs2 billion in the same quarter last year.

The result announcement was accompanied by a second interim cash dividend of Rs20 per share, taking the cumulative 1HFY16 cash dividend to Rs40 per share. The KSE-100 Index closed at 30,802, just 15 points or 0.05% higher on Thursday, with the company’s share price closing 1% higher to end at Rs930 per share.

According to AKD Research report, Indus Motor benefitted from favourable currency swings (1HFY16 average yen against dollar depreciation of 11.5% year on year (YoY)) and weakness in input prices (China steel sheet price dropped by an average 34.8% year-on-year) during the period.

The company also benefitted from maintenance of superior pricing power amidst escalated off-take (Corolla sales for the period were up 33.5% YoY), which raised the revenues by 31% YoY.

“The company’s margins are poised to stabilise in the near term,” stated the report. “This is because of strong core profitability on the back of favourable external factors (yen depreciation, rupee and dollar parity holding steady, steel prices falling), margins firming up and the Corolla variant continuing to benefit from the ‘feel good’ factor.” However, the stabilisation of external factors and decline in Corolla demand are expected to slow down the company’s earnings.

Indus Motor Chief Executive Officer Parvez Ghias said improved macroeconomic indicators have helped fuel demand. “Historic low inflation and interest rates, availability of auto financing, stability in the retail selling prices of completely-knocked down (CKD) vehicles and low fuel prices have all contributed to the robust demand,” said Ghias.

The company operated its manufacturing facilities at full capacity to satisfy the market demand. Ghias said the IMC achieved a new milestone of 65,000 units of sales during calendar year 2015.

Published in The Express Tribune, February 26^th, 2016.

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