Indus Motor’s combined market share for locally manufactured vehicles for the year stood at 28%. PHOTO: INDUS MOTOR COMPANY
Earnings of Indus Motor Company (IMC) – the second largest carmaker in Pakistan – declined by a significant 23% in fiscal year 2013, but managed to beat market estimates. The carmaker reported a profit of Rs3.35 billion in fiscal 2013, compared to Rs4.30 billion it earned in fiscal 2012.
The company declared a final cash dividend of Rs15 per share, which was higher than the estimates of Global Securities as it was expecting a dividend of Rs12 per share. The cash dividend was in addition to Rs10 share already paid out during the year, taking the total payout to Rs25 per share.
The revenues of the company dropped to Rs63.83 billion during the year, down 17% year on year (YoY) compared to Rs76.96 billion in the previous year. The fall in revenue was due to discontinuation of the Daihatsu Cuore, an 800cc engine car that the IMC stopped assembling in early fiscal 2013, along with a continued ban on the production of CNG-fitted cars during the year.
The good news for the company was the increase in gross margins which improved by 65 basis points (bps) to 9.2%, compared to the last year. Global Securities believes the improvement in margins was attributed to lower cost on completely-knocked-down (CKD) kits on the back of depreciating Japanese yen against the rupee.
Analysts say the increase in margins of IMC is good for the company, despite the fact that sales have declined considerably during the outgoing fiscal year. They also estimate that the overall depreciation of the Japanese yen during the last fiscal year was more than 20%.
“Yen has depreciated significantly against the rupee that supported the (gross profit) margins of all the carmakers in Pakistan including IMC,” Atif Zafar, analyst at JS Global Capital told The Express Tribune.
“What matters more for local auto assemblers is the increase in margins and not volumetric sales,” another analyst commented.
The company’s other income declined to Rs1.04 billion during the fiscal year. We believe the decline in the company’s other income was on account of lower advances received by the company due to weaker car sales, and a cut in discount rate by 300bps during the outgoing year, the report added.
In a press release, IMC said that fiscal 2013 was a difficult year for the company with operational challenges stemming from the influx of used cars in the market, weak economy, energy shortage and poor law and order situation in the country.
On year to date basis, sales of Toyota CKD and completely built unit (CBU) dropped 28% to 39,774 units compared to 55,060 units sold during the same period last year.
Indus Motor says that adverse market conditions compelled the company to curtail production to 37,321 units, down 32% compared to 54,917 units produced during the same period of last year. IMC’s combined market share for locally manufactured vehicles for the year stood at 28%.
Published in The Express Tribune, August 28th, 2013.
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