Indus Motor profit grows by 35 percent

KARACHI (April 26 2004): The Indus Motor Company in nine months ended March 31, 2004 recorded a growth of 35 percent on higher sales after banks and other financial institutions initiated plans to provide auto loans on soft-terms.

The sales of the quarter under review increased from Rs 4.08 billion in the second quarter to Rs 5.71 billion.

The cost of sales, however, shot up on the back of increased steel prices in the recent past, from Rs 3.5 billion to Rs 5.14 billion, rising by 47 percent.

Furthermore, gross margins were squeezed from 14 percent to 10 percent for the same reason on quarter-on-quarter basis.

Other income declined from Rs 179 million to Rs 54 million, dropping by 70 percent. Financial charges increased from Rs 19 million to Rs 23 million, rising by 21 percent. Net margins in this quarter were the lowest during the year at 5 percent compared to 7 percent in the second quarter and 8 percent in the first.

Faisal Jiwani, research analyst from Capital One Equities, said the sales for the nine months grew by 54 percent from Rs 10.25 billion to Rs 15.82 billion on a year-to-year basis.

However, the cost of sales grew by 56 percent. Gross margins fell from 13 percent to 12 percent as net margins fell from 7.8 percent to 6.8 percent.

The bottom line, however, increased by 35 percent year-on-year basis, owing to lower financial charges amounting to Rs 44 million as compared to 71 million in the same period last year.

He said the company has recently introduced a new model of its small-sized Cuore, which was introduced in 1999, with an automatic gear, which is further expected to boost sales.

Although the plant capacity is of 26,000 units, it is difficult to achieve maximum capacity utilisation, and efforts are being made to utilise the total installed capacity.

The demand is still very high with orders already being piled up for October 2004 and further booking has been suspended.

The company has plans to expand the total capacity to 36,000 units within a year to overcome this situation.

As per revised estimates (taking into account the increased steel prices and increased cost to the company), the company is likely to post an after-tax profit of Rs 1.38 billion – Rs 1.43 billion (EPS: Rs 17.54 – Rs 18.21) with a turnover ranging from Rs 21.5 billion to Rs 23.5 billion.

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