LAHORE – SALMAN ABDUHU - Gross profit of the Indus Motor Company Limited has reached Rs2.47 billion as against the gross profit of Rs1.40 billion in 1HFY11, showing a gigantic augment of 77 percent annually. The company has also announced an interim cash dividend of Rs8/share along with its results.

The company has announced 1HFY12 financial results, registering a massive 95 percent annual jump in its earnings to Rs1.77 billion translating into an EPS of Rs22.48 as against the PAT of Rs908m and EPS of Rs11.55 in the corresponding period last year.

According to experts, the exciting growth in the bottom line can be attributed to the massive growth in the top line of the company which has posted a rise of 23 percent YoY to Rs33 billion in comparison of the sales of Rs26.83 billion in the same last year owing to be higher prices and better volumetric sales. The company has registered a sharp 7 percent YoY growth in its volumetric sales to 24,066 units in 1HFY12 as against 22,408 units in the same period previous year.

The operating profit of the company has registered an enormous upsurge of 106 percent YoY to Rs1.91 billion as against Rs925m in 1HFY11 despite of 20 percent YoY higher operating costs. EBIT has also surged by 72 percent YoY to PKR2.65 billion versus PKR1.54 billion in the same period last year mainly because of 25 percent YoY rise in other income. On the other hand, financial cost has declined by a sharp 61 percent YoY to PKR44m as against PKR111m in 1HFY11 which has enabled the company to post some added growth of 82 percent YoY in PBT which has reached PKR2.60 billion in 1HFY12 as against PKR1.43 billion in 1HFY11.

As per the statement issued by the company, automotive industry had to face many challenges during the fiscal year 2012 which includes managing severe supply disruption due to Thai floods together with steep rupee devaluation, increased cost pressures due to energy shortages and influx of used cars.

Commenting on the results the spokesperson said that, during half year company’s sales grew by 6.3 percent to 24,341 units compared to 22,903 units sold for the same period last year. Correspondingly the production also increased by 3.5 percent to 24,316 units as against 23,482 produced in the same period last year. The company’s combined sales revenue for CKD, CBU & Parts business amounted to Rs. 33 billion and the profit after tax stood at Rs. 1.77 billion on account of increased sales volume and cost efficiencies.

Commenting on quarterly performance, spokesperson said, “Going forward the challenges for auto industry will be depreciating rupee and resultant cost pressures, expiry of AIDP, correction in commodity prices which may impact rural buying, impact of ban on CNG cylinders & conversion kits imports and influx of imported used cars. The company will remain focused on improving its operational efficiencies to counter these challenges and deliver maximum value to its customers”.

Experts believe that the higher remittances and wheat support prices were the key factors behind the growth during the 1HFY12, however, keeping in view risks to the macroeconomic stability primarily because of the fiscal weaknesses and falling financial inflows we see further pressure on rupee which has already depreciated by 5.2 percent so far in FY12.

They believe that further depreciation in the rupee can force the company to go for another price hike as the company imports its major parts from Thailand and Japan and rupee depreciation makes imports expensive. We believe since the company which has already increased its prices recently to mitigate foreign exchange losses if goes for another price increase that would put a negative impact on its sales going forward.