The dip in automobile sales during FY14 naturally left a bearing on Agriauto Industries Limited (KSE: AGIL). This is evident from net sales of AGIL which show the most notable shift in the financial results announced by the company.
The results are not surprising. Auto numbers released by PAMA earlier had given that indication already. Both production as well as sale remained stagnated across all categories in the sector. Local car sales remained subdued through the year on account of multiple factors, including increased inventories of imported cars, higher taxes imposed in Budget FY14 (One percent higher GST and 10 percent FED), higher registration and withholding taxes and relaxation of import duties on hybrid vehicles. In December 2013, a ban was also imposed on the import of CNG kits.
However, AGIL has still managed to post decent earnings, which have largely benefited from other income and a decline in finance costs. While operating profits showed a decrease of 14 percent, there has been an improvement in net margins compared with last year on account of a significant decline in taxation. This had led to a cash dividend of Rs5 per share.
The budget announced for FY15 could prove to be a harbinger for the automobile sector at large (see BR Research column An auto-friendly budget, dated June 10, 2014), which would work well to boost declining volumes for AGIL as well.

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AGIL-KEY FINANCIALS
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Rs (mn)                      2014      2013        Chg
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Net turnover               3158.8    3503.6     -9.80%
Cost of sales             -2647.9     -2929     -9.60%
Gross margin                16.20%    16.40%         -
Finance cost                -0.09     -0.13    -29.40%
Operating margin            10.60%    11.20%         -
Other income                105.4        82     28.60%
Profit before taxation      403.6     439.1     -8.10%
Taxation                    -95.3    -129.7    -26.50%
Net margin                   9.80%     8.80%         -
EPS-basic & diluted (Rs)     10.7     10.74     -0.40%
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Source: KSE notice
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