Indus Motors reported a massive profit for the nine months ending March. The company said its profits soared almost four times over the comparable period last year, on the back of higher volumetric sales, cost efficiencies and improvements in localization level.
Benefiting from strong demand for Corolla, the firms total sales volume grew by nearly 53 percent, helping the companys overall market share rise by 5 percentage points to 36 percent during the period under consideration.
That coupled with higher auto prices during the third quarter also supported INDUSs top-line growth. Consequently, revenue during the period nearly doubled to Rs40 billion.
Cost efficiency measures adopted in previous years helped the firm curb administration and distribution expenses, as both reduced considerably as a percentage of sales. Improvements in capacity utilization reduced per unit cost - boosting gross profit margin by 3 percentage points to 8 percent.
Likewise, operating income trebled during the period compared to a year earlier on account of surplus cash on the balance sheet strengthening the bottom line. Finance expenses soared to Rs107 million owing to a spike in mark-up on advances from customer; incurred on delayed delivery orders.
Corolla remained the star product for Indus Motors; fuelled by improvements in macroeconomic indicators and to some extent due to low base effect last year, Corollas sales volume grew by nearly 74 percent over the same period last year.
But while growing demand for Corolla and Hilux bodes well for the current year, demand for Cuore remains disappointing; sales fell by 22 percent over last year.
Indus Motors still faces some problems in the near term owing to the weakening rupee, which is anticipated to remain under pressure due to rising oil and commodity prices. Additionally, rising steel prices also pose threat to the auto industry.
On a positive note for investors, the company has the ability to pass on the rising cost to buyers, since it sales mix is more tilted towards the higher end of the auto market, where demand is relatively price inelastic.
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Indus Motor Company
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Rs (mn) 9MFY10 9MFY09 %chg
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Net Sales 40,090 24,838 61%
Cost of sales 37,072 23,707 56%
Gross profit 3,018 1,131 167%
Gross margin 8% 5% 65%
Admin expense 263 233 13%
Distribution expense 334 338 -1%
Other operating expenses 273 79 246%
Other income 1,322 400 231%
Finance cost 107 31 245%
PAT 2,175 565 285%
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Source: KSE Announcement
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