Indus Motor Company scored a resounding victory in FY10; yesterday the firm unveiled a massive rise in net profits, which more than doubled to Rs3.44 billion in the year ending June.
The companys record high bottom line was a result of highest ever annual production, unit sales volume, and gross revenues since its inception. Correspondingly, INDUs directors have announced the highest ever dividend payout in the companys history.
Driven by volumetric sales growth of 49 percent, INDU clocked a revenue growth of nearly 60 percent in FY10.
Much of the gain in sales is attributed to the massive rise in demand for Corolla, fuelled by higher remittances, better agriculture crops and a fragile but gradual recovery in overall economy. In contrast, the demand for Cuore continued its journey downward, the number of Cuore sold fell by 9 percent to 5301 units in FY10.
Cost reduction from economies of scale coupled with easing of yen during the last quarter FY10 lifted the gross margin by 2 percentage points to 8 percent. Moreover, a better cash position and prudent realization of funds helped the firm more than double its other operating income, while gain on revaluation of foreign exchange contracts resulted in lower finance cost.
The only trouble for INDU, just as for other automakers, is that FY10 was a period of short lived happiness.
Last year had been a relatively better year for the auto industry at large, but recent floods have added the caveats that economic indicators that had started improving in FY10 would start slipping back in the ongoing fiscal year.
For Indus Motor, the floods will hurt even more, the firm benefited largely from a better agriculture income over the past few years, as a major portion of Corolla and Hilux buyers belong to the rural areas, who are seen taking a hit on their farm income as a result of these floods.
Tall yen that reached its 15-year high against dollar of late, and appreciated by 10 percent against rupee since January, would also spell trouble for local automakers in the current fiscal year.
To cap it all, with backing and filing in the announcement of the trade policy, sales of small cars in July remained relatively weak on month-on-month basis, as the question loomed in buyers minds whether the government will further relax the used-car import policy. If the government loosens restrictions, the local industry would stand a little chance of gaining growth down the road.
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INDUS MOTOR COMPANY LTD
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Rs (mn) FY10 FY09 %chg
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Net sales 60,093 37,864 59%
Cost of sales 55,382 35,540 56%
Gross profit 4,711 2,324 103%
Gross margin 8% 6% 28%
Distribution exp 468 470 0%
Administrative exp 382 352 8%
Other operating exp 416 156 167%
Other operating income 1,801 727 148%
Net profit 3,443 1,385 149%
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Source: KSE Announcement
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