Corporate results: Indus Motor’s profits register slight improvement over last quarter

Earnings are still 40% lower YoY due to lower sales and cash advances.

KARACHI:

The Indus Motor Company has announced its profits for the first nine months of fiscal 2013 (9MFY13), which have clocked in at Rs1.73 billion (earnings per share of Rs22.01). As compared to Rs2.89 billion recorded for 9MFY12, the company’s profits have registered a 40% decline year-on-year (YoY).

The company has also announced a surprise dividend of Rs4 per share along with the result announcement. In addition to the half-year dividend of Rs6 per share, this takes the total cash payout to Rs10 per share for 9MFY13.

In the results sent to the Karachi Stock Exchange, a 46% decline in other operating income stands out as the greatest contributor to the fall in profits. Analysts have pointed out that the company holds lower cash reserves due to a fall in customer advances on sales, and has received lower returns from bank deposits on account of lower interest rates at the same time.

The company’s topline also registered a significant decline, falling by 21% YoY on account of lower sales volumes (which have fallen 34% YoY) and a 69 basis points decline in gross margins due to an increase in per unit production costs, says a note issued by AKD Securities. However, lower sales were partially compensated for by a 6-8% increase in prices of Toyota Corolla, adds an analyst note issued by Topline Securities.

On a quarter-on-quarter (QoQ) sequential basis, however, the company has recorded significant improvement in its fortunes in the third quarter of fiscal 2013 (3QFY13). The company’s earnings grew by a healthy 162% to Rs752 million in 3QFY13 versus only Rs287 million in 2QFY13. The company’s gross margins also rose by 170 basis points in 3QFY13 due to a 70% increase in sales. “Furthermore, the depreciation of the yen against rupee and the dollar also eased off cost pressures,” she added.

The 74% QoQ increase in sales volumes to 11,130 units was supported by 228 units of the newly-launched Toyota Fortuner, added Hassan Quadri from AKD Securities. However, volumes are down 25% as compared to 14,792 units in 3QFY12, notes Topline Securities.

Indus Motor Company has said in the past that the presence of used imported car models in the Corolla category has impacted sales of the company and severely restricted its overall market share. The Corolla is Indus Motor’s flagship car, which has a market share of over 70% in the 1,300cc-engine category in Pakistan.

Published in The Express Tribune, April 19^th, 2013.

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