Indus Motor Company’s profits almost doubled to Rs1.77 billion during July to December 2011 primarily due to higher sales and prices of its leading brand Toyota Corolla.
The improved profitability more than compensated for rising cost pressures and increased the company’s gross margins, said analysts. Gross margins rose by 3% to stand at 8% during the period under review against 5% in the same period a year ago.
Driven by healthy cash balances and advances, other income improved by 25% to Rs947 million and further supported the bottom-line.
Furthermore, the result was also accompanied by a cash dividend of Rs8 per share.
The country’s second largest automobile maker’s net sales went up by 23% to Rs32.9 billion in the first half of fiscal 2012 against Rs26.8 billion posted in the same period a year ago.
The company hiked prices by 7% during the year but this did not stop volumetric sales from growing 8% to 24,066 units in first half of fiscal 2012.
The major contributor was its Corolla variant with almost 83% of total sales. The company’s smaller variant Coure sales went down by 31% as the company is planning to discontinue the model from June. Moreover, Hilux sales improved by a massive 149% to 2,200 units.
Automobile assemblers importing completely knocked down parts from Japan and Thailand are always exposed to the detrimental impact that can be caused by foreign exchange volatility.
Cost of production rose by 21% on the back of 11% jump in steel prices and devaluation of the rupee against Japanese yen by 11%.
Although Indus Motor has been able to pass the rising cost to consumers, more than foresighted depreciation in the rupee can shrink margins.
Further depreciation in the rupee can force the company to go for another price hike, said Summit Capital analyst Sarfraz Abbasi.
In addition, lower effective tax rate of 32.2% against 37% last year further supported the bottom-line during the period under review.
Published in The Express Tribune, February 23rd, 2012.
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It would be good to know what percentage comes from sale of cars to government / semi government agencies as against from private buyers. New Corollas with ' green ' number plates seem to be breeding like rabbits.
These manufacturers always close their financial period with windfall profits, but whenever govt ease down its policy for import vehicles they start crying like a baby!!