Indus Motor profits drop 44% as car sales fall

Compan­y announ­ces Rs6 per share interi­m divide­nd.  The company said the sluggish market demand forced it to shut down the plant for 53 days, but it did not lay off any workers.

KARACHI: 

After a robust fiscal year 2011-12, Indus Motor Company saw a considerable dip of 38% in car sales in first half (July-December) of current fiscal year, which brought down profit after tax by 44% to Rs0.98 billion compared to Rs1.77 billion in the same period of last year.


Sales of Toyota brand, both completely knocked down (CKD) and completely built units (CBU), were down 38% to 14,994 units compared to 24,341 units in the corresponding period last year.


Net sales revenue for the first half of 2012-13 decreased 26% to Rs24 billion compared to Rs33 billion in the corresponding period of previous year.


The company said the sluggish market demand forced it to shut down the plant for 53 days, but it did not lay off any workers.


Indus Motor is not the only car assembler which saw its sales plunge, other two car assemblers – Honda and Suzuki – also faced similar challenges in the first six months of FY13.


Atif Zafar, analyst at JS Global Capital, told The Express Tribune sales of Honda and Suzuki remained weak from July to December 2012. “However, with the obvious decline in import of used cars from January onwards, we must expect a sustained increase in sales of all three car assemblers,” he said.


Another plus point for these Japanese car assemblers was that the Japanese yen had been falling for the past couple of months, which would reduce the import cost of parts and components, he added.


Overall, the domestic auto industry endured a difficult period in the first half of FY13 with sales plunging 30%.


“The industry is thankful to the government for its decision to reduce the age limit of imported used cars from five to three years. This will ensure survival of the local auto industry. It is in the national interest that a stable policy environment is provided for the industry to play a meaningful role in economic development,” said Parvez Ghias, CEO of Indus Motor in a statement.


The board of directors declared an interim dividend of Rs6 per share for the half year compared to Rs8 per share in the same period last year.


Indus Motor said presence of used imported car models in the Corolla category impacted sales of the company and severely restricted its overall market share, which dropped to 25% compared to 30% in the corresponding period last year.


Published in The Express Tribune, February 23rd, 2013.


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