Newer models of Toyota Corolla and Hilux helped shore up sales for Indus Motors, but could not do the same for the companys bottom line in the outgoing quarter.
Rising agricultural income as well as availability of low-priced models of Hilux boosted the demand for the pick-ups that rocketed by 134 percent (year-on-year) in Jan-March 2011.
The companys gross margins declined by 190 basis points, year-on-year, to 5.6 percent in 9MFY11, primarily due to the rupees 11 percent depreciation against the Japanese yen during the period. In addition, steel prices - that rose by about 12 percent over the period - also squeezed the firms margins.
Local car assemblers have not been able to pass on price increases to customers on account of government pressure and easier terms for the import of used cars into the country, At the other end, however, inflation has been busy stoking the proportion of both distribution and administrative expenses. As a percentage of sales, distribution and administrative expenses, cumulatively, crept up 30 basis points year-on-year during the nine-month period.
Other operating income declined by 16 percent which the company sources attribute to lesser delivery time that clipped the income earned on customer deposits.
Going forward, rising international prices of oil and other commodities are likely to keep the local currency under pressure. On the other hand, the arrival of used imported cars will also dent the market shares of local car assemblers, including Indus Motors.
And if that wasn enough, the recent tsunami in Japan has forced INDU to scale back new orders for all its models. "We will be working at about 60 percent capacity through May and June," a company official told BR Research.
The situation beyond June is also dicey at the moment. Asked whether output will be restored by July, the official said, "The situation is fluid and we will inform on it as things become clearer". In other words, unless INDU pulls off a miracle, one can expect the companys profits to deteriorate further in the last quarter of this fiscal year.
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Indus Motors Company
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Rs (mn) 9MFY11 9MFY10 Chg
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Net Sales 45,288 40,090 13%
Cost of Sales 42,739 37,072 15%
Gross Profit 2,549 3,018 -16%
Gross Margin 5.6% 7.5% -25%
Distribution Expenses 503 334 51%
Administrative Expenses 308 263 17%
Other Operating Income 1,108 1,323 -16%
PAT 1,603 2,176 -26%
EPS (Rs) 20.39 27.68 -26%
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Source: KSE notice
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