Indus Motor Company has been mired in problems such as a flurry of imported cars in the country and the discontinuation of their hot selling item, Cuore due to non-compliance with Euro II standards. So it is little wonder that the Company’s top line receded by 26 percent, compared to 1HFY12.
The discontinuation of Cuore meant sales of that model fell to just 71 units in the first six months of this fiscal. But the Corolla, which is still the Company’s bread and butter, was also less popular during this period. Corolla sales fell by a drastic 38 percent.
Even the new variant of Corolla couldn’t revive the IMC’s gloomy fortunes. The new model of Honda Civic which is akin to Accord in its appearance grabbed the attention of many prospective car buyers with a larger purse, while imported cars also offered troublesome competition for IMC.
Car dealers point out that Corolla prices have also gone up recently. They assert that unlike the Honda Civic which targets the elite class, Corolla caters to the masses, who are price conscious so this model is relatively more price sensitive.
Another occurrence that may have hurt sales is the fact that the Company’s plant was shut down for two months of the 1HFY13. Even the big car craze couldn’t help the Company register any major bottom line boost. Sales of Hilux grew by a meager two percent in the period under review.
Weakening Yen against Rupee provided much needed sustenance to the margins of the Company by reducing the cost of imported components. During 1HFY13, company realized a gross margin of 7.2 percent as against 7.5 percent in the previous year.
The increase in distribution expenses due to advertising and sales promotion of the new model coupled with a rise in administrative expenses took its toll on the bottom line of company. What’s more, a 48 percent drop in the other income due to declining interest rates and cash positions also depressed profit. But lower interest rates buttressed financing cost for IMC which fell by 70 percent during the period.
Profit after tax was down by 45 percent YoY to tally Rs977.905 million in 1HFY13 culminating into earnings per share (EPS) of Rs12.44, as against Rs22.48 during the same period, last year.
In the second half of FY13, the auto industry is expected to step into a recovery phase as the true impact of restriction on the age limit of imported cars will be evident from January onwards. Besides car booking have historically been low in November and December.
Cost control should also be easier for the Company in coming months as monetary easing in Japan will likely erode value of the Japanese Yen against other currencies, including Pakistan Rupee.
======================================================================================================
INDUS MOTORS COMPANY LIMITED
======================================================================================================
(Rs mn) chg 1HFY13 1HFY12 chg 2QFY13 2QFY12
======================================================================================================
Sales -26% 24,279.32 32,999.57 -32% 10,804.73 15,853.28
Cost of sales -26% 22,528.09 30,524.46 -30% 10,209.53 14,633.32
Gross (loss) / profit -29% 1,751.23 2,475.11 -51% 595.20 1,219.96
Distribution and marketing costs 17% 353.83 302.63 4% 171.94 164.78
Administrative expenses 24% 329.85 266.73 17% 164.02 140.57
Other operating expenses -40% 122.79 205.15 -58% 39.78 93.66
Other operating income -48% 493.22 947.00 -53% 191.21 403.51
Profit/(Loss) from operations -46% 1,437.99 2,647.60 -66% 410.67 1,224.45
Finance cost -70% 13.06 43.54 -67% 9.15 27.72
Profit/(Loss) before taxation -45% 1,424.93 2,604.06 -66% 401.52 1,196.73
Taxation -47% 447.02 837.44 -69% 114.39 367.60
Profit/(Loss) after taxation -45% 977.91 1,766.62 -65% 287.13 829.14
Loss per share - basic and diluted (Rupees) -45% 12.44 22.48 -65% 3.65 10.55
------------------------------------------------------------------------------------------------------
Source: KSE Notice
======================================================================================================