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Top automobile assembler suffers due to govt measures

Lower gross margins and the imposition of super tax greatly impacted the company during last quarter as earnings in the said quarter were massively blown, depicting a decline of 88 percent year-on-year and 90 percent quarter-on-quarter basis.

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Automobile assembler, Indus Motor Company Limited, held a corporate briefing session on 27th September 2022 to discuss the financial results of FY22 and future outlook.

As shared by Arif Habib Limited, the company posted an earning of PKR 15.8.2 million during FY22, showing an increase of 23 percent on yearly basis from PKR 12,829 million in FY21.

Read more: Despite massive blow to profits- Indus Motors’ earnings up by 23pc

However, lower gross margins and the imposition of super tax greatly impacted the company during last quarter as earnings in the said quarter were massively blown, depicting a decline of 88 percent year-on-year and 90 percent quarter-on-quarter basis.

While discussing the company’s financial performance, the management emphasized that it has achieved all time high volumes of auto sales in FY22, clocking-in at 75,611 units compared to 57,731 units same period previous year. Whereas, in the last quarter of FY22 company documented sales of 17,966 units compared to 14,566 units in the last quarter of FY21.

Despite higher volume of sales, Indus Motor Company recorded a massive drop in its gross margins which were recorded at 1.16 percent in the last quarter of FY22 vis-à-vis 12.28 percent in the concluding quarter of last year. This was attributed to higher international commodity prices and depreciation of PKR against the US dollar.

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In addition, the management stated that the work on hybrid mode is in progress, and they are planning to launch the same in the ongoing fiscal year.

As a result of limitation on raw material imports, the plant is being operated at 40 to 40 percent capacity. The management expressed its expectation that if restrictions are completely lifted, the company will be able to fulfill the purchase orders within 2-3 months.

The management also shared their forecast about the auto industry sales to drop by 40 percent, around 200k units in FY23.

In first quarter of FY23, the company is finding it hard to breakeven due to: i) demand being curbed on the back of higher auto financing rate in the rising interest rate scenario, ii) higher cost of production due to currency depreciation, and iii) Restriction on import of raw material by the State Bank of Pakistan.

Being involved in assembling by importing raw materials, the auto sector has greatly suffered due to restrictions imposed by the government to curb import bill. However, the management does not foresee any relaxation from the government in the near future for the auto sector.