Indus Motor announces Rs3.3b investment

Capital expenditure meant to increase production capacity to 76,000 units

KARACHI: The board of directors at Indus Motor Company (IMC), the makers of Toyota vehicles in Pakistan, has approved to invest Rs3.3 billion with the aim to increase its annual production capacity to around 76,000 units.

In a notice sent to the Pakistan Stock Exchange (PSX) on Tuesday, IMC Company Secretary Muhammad Arif Anzer said the "investment is planned to be made in different production areas to debottleneck production facility and improve efficiency to increase productivity."

The expected increase will be achieved during the financial year 2020-21.

"Considering sustained growth in demand and the overall market, the board of directors has approved Rs3.3 billion for capital expenditure to increase the productivity of manufacturing, which will enhance the annual normal vehicle production capacity to around 76,000 units, on double-shift basis, based on average normal working hours in a year," Anzer said in the company notice that also announced financial results for fiscal year ended June 30, 2018.



According to JS Research, the present annual capacity of the company stands at 65,000 units and the new capital expenditure will help it increase its capacity by 17%. The company manufactured 62,886 units in the financial year 2018.

IMC has been planning to increase its production for some time now and the announcement has not come as a surprise to the industry.

"This new announcement of Toyota has not come as a surprise and we have already been assessing the company's outlook on the basis of this production increase," Elixir Securities' Farheen Irfan told The Express Tribune.

The company will also import completely built units (CBU) of Toyota Rush from next month as it aims to capture the price segment between its Corolla and Fortuner vehicles amid increasing competition from green- and brown-field beneficiaries.

Toyota's profit jumps 21% in 2018

On the other hand, IMC posted Rs15.77 billion in profit for the financial year 2018, an increase of 21% as the company reported a profit of Rs13 billion last year.

Earnings per share for the year stood at Rs200.66 as compared to Rs166.41 for the previous years. The company also announced a final cash dividend of Rs45 per share, taking total payout for the year to Rs140 per share.



The company manufactured 62,886 units in fiscal year 2018, up 5% compared to 59,945 units produced during fiscal year 2017.

The combined sales of Toyota CKD and CBU vehicles stood at 64,000 units, up by 5.7% compared to 60,586 units in the previous year. Despite the increased volume, IMC's market share declined from 28% to 24%, mainly due to overall market expansion and growth.

Meanwhile, quarterly earnings grew by 50% on a year-on-year basis. According to JS Research, growth in earnings was due to a 17% increase in volumetric sales and higher proportion of premium variants.

Gross margins were higher than expected at 17%, up by 47 basis points, largely countering the negative impact of rupee depreciation against the dollar. Its other two competitors, Pak Suzuki and Honda, have witnessed a steep decline in margins by comparison.

Topline Securities research analyst Syed Daniyal Adil said that the company has posted healthy profits, which has succeeded market expectations.