Full year net profits of Indus Motor Company dropped 40 percent in fiscal year 2009, as economic slowdown dampened its sales, while a weak currency clipped its gross margins. Although, its topline fell 9 percent over last year, the firm fared much better compared to its peers.
INDUs sales volume decreased by 29 percent - much lower than 47 percent decline suffered by the industry. The companys gross margins were slashed almost a third as 37 percent rupee deprecation against the Yen and higher steel prices during first half of FY2009 marred its performance.
With the decline in number of cars booked over the period and consequent advance cash deposits, the automaker took extra loans to finance its working capital - pushing its finance cost higher by nearly 13 times. The interesting thing about INDUs performance is its ability to increase its market share to 35 percent, from 26 percent in FY08, in such constraint times.
This jump is primarily attributable to the sale of high end cars Toyota Corolla and Hilux - accounting for 75 percent of sales volume - that managed to maintain its share in the market.
While the sale of high end cars got a boost on the back of 20 percent cut in prices by third quarter FY09, that of low end and price elastic Daihatsu Cuore fell 50 percent as consumers weren lured by price cuts and still perceived it too costly given the current financial condition. Going forward, the elimination of 5 percent FED and reduction in interest rate will have a positive impact on recovery of auto sector, as evident from growth in sales volume since start of FY10.
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INDU RS(MN) FY09 FY08 % CHG
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Sales 37,864 41,423 -9%
Cost cf sales 35,540 37,575 -5%
Gross profit 2,324 3,848 -40%
Gross margin 6% 9% -33%
Distribution exp 469 487 -4%
Admin exp 352 297 19%
Other operating exp 156 306 -49%
Other income 727 786 -8%
Finance cost 26 2 1200%
PAT 1,385 2,290 -40%
EPS (Ps) 17.62 29.15 -40%
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