Agriauto—woes: is there an end in sight?

Another quarter bites the dust. And with it, comes another abysmal performance of an auto parts manufacturer.
Sure, Agriauto’s 1Q FY14 earnings are definitely not the lowest-ever, but they are lowest since the crisis-hit ‘08. From turnover to net income, pretty much every head on the P&L posted a year-on-year decline, sadly nothing new for the automotive giant of yesteryears.
Compared to first quarter of FY13, sales declined sizeable by 12 percent. These came on the back of reduced car sales, of which Agriauto is a major parts supplier. Diversification into tractor-parts manufacturing did not help the situation either, as tractor sales shrank due to higher taxes in the latest budget.
Cost of sales surged by 330bps as input costs rose on account of increase in power tariff and rupee depreciation. The company registered a five-year low in gross margin, clocking in at 14 percent of sales.
The management was, however, successful in keeping operating expenses in check, as admin costs were reduced (as a percentage of top line) by a nominal 17bps. Yet, the worst shame for the firm came near the end of P&L, as it posted net margin of 6.3 percent for the quarter—lowest ever since the company began publishing its quarterly accounts in FY05.
According to the company sources, the imposition of extra sales tax of two percent on auto-parts and accessories will worsen the situation as it encourages the undocumented economy and create an imbalance in the playing field. The company seeks to highlight the issue to the FBR. But unless the new tax is reversed, there seem little hope for Agriauto’s bleak prospects.

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AGRIAUTO INDUSTRIES LIMITED

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Rs (mn)                      1QFY14    1QFY13       chg

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Turnover-net                    751       858      -12%

Cost of sales                 (642)     (705)       -9%

Gross profit                    109       153      -29%

Operating profit                 68       104      -35%

Profit after taxation            47        77      -39%

EPS (Rs)                       1.65      2.69

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Source: KSE notice

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