INDUS MOTOR COMPANY LIMITED

S.KAMAL HAYDER KAZMI,
(feedback@pgeconomist.com)
Research Analyst
, PAGE
Sep 24 - 30, 2012

Indus Motor Company (IMC) is a joint venture between the House of Habib, Toyota Motor Corporation Japan (TMC), and Toyota Tsusho Corporation Japan (TTC) for assembling, progressive manufacturing and marketing of Toyota vehicles in Pakistan since 1990. The Company also acts as the sole distributor of the Toyota and Daihatsu vehicles in Pakistan. Indus Motor has a license for assembling, progressive manufacturing and marketing of these vehicles in the country. During the quarter ended march 2012, the combined sales of Toyota and Daihatsu brands (CKD & CBU) were 15,002 units, marginally down compared to 15,084 units sold in same period last year. Despite several operational difficulties stemming from energy shortages, poor law and order situation in the city, the company operated at near full capacity to meet the market demand. The production of PC and LCV for the quarter increased by 4.7 per cent to 15,677 over 14,969 units produced in the same period last year. The company discontinued production of economy segment Cuore in March 2012 upon it reaching the end of life cycle. On year to date basis, combined sales of Toyota and Daihatsu brands (CKD & CBU) grew 3.6 per cent to 39,343 units compared to 37,987 units for 2011, while the production was up by 4 per cent to 39,993 units versus 38,451 units produced for the same period last year. IMC combined market share for the nine months period ended March 2012 for locally manufactured vehicles stood at 31 per cent. The sales revenue for the nine months ended March 2012 was Rs 53.9 billion, up 19 per cent over Rs 45.3 billion posted for the same period last year. Continuous efforts at improving operational efficiencies and partial pass through of risings costs enabled the company to achieve profit after tax of Rs 2.9 billion as compared to Rs 1.6 billion posted for the same period last year. Corolla remains the best selling sedan in Pakistan and now the customers have the pleasure to enjoy convenience of the navigation system which was introduced recently in all high end variants. In March, 2012 the company introduced much awaited Hilux Vigo Champ with an automatic transmission on strong customer demand. The launch of Vigo Champ along with the new model change in the Hilux line with stronger, bolder fascia and vibrant interior has fascinated and captured the market attention.

AUTOMOTIVE INDUSTRY

In 2012, the growth rates of the global automotive industry are expected to remain low. Developing automotive markets will demonstrate a better pace, while European countries will be forced to take additional steps to resolve their public debt problems. This will significantly limit their ability to stimulate the automotive market through car scrapping programs, which were an important tool of promoting demand in the period from 2008 to 2010. Meanwhile, developing economies display a consistently high demand for automobiles. This is due to higher economic growth rates and a considerably lower car density index per 1,000 people as compared to the developed economies.

In Pakistan, operating environment for the local auto manufacturers remained challenging with the industry besieged with large scale imports of used vehicles and rising inflationary pressure that inhibited demand despite significant easing off in the supply situation disrupted earlier on account of the floods in Thailand.

However, during 2010-11 buses, cars, LCVs and two/three wheelers managed to grow by 23 per cent, 9.1 per cent, 5.7 per cent and 3.1 per cent compared to 24.7 per cent, 16.4 per cent, 20.5 per cent and 12.6 per cent respectively during the same period last year. A larger decline was witnessed in tractor production which was recorded at 48 per cent compared to negative growth of 2.2 per cent.

During the start of the fiscal year, production of tractors declined substantially by almost 70 per cent after the imposition of the 16 per cent general sale tax (GST) in April 2011. Following the government's announcement to cut GST from 16 per cent to 5 per cent production figures have started to recover. The two other components of the automotive industry such as jeeps and trucks also showed dismal performance by registering negative growth of 44 per cent and 6.8 per cent respectively.

The Punjab government taxi scheme and impact of deferred sales during the first quarter following reduction in GST and SED taxes announced by the GOP in 2011. This is a worrisome factor for the industry already confronted with the negative fallout of a record 30,000 units of used car imports and the government decision to ban CNG kits and cylinders that has effectively frozen CNG vehicle production by OEMs further dampening the growth prospects of the local industry already reeling under social and economic pressures.

FINANCIAL PERFORMANCE (Rupees in '000)

INDICATORS MARCH 31, 2012
(UNAUDITED)
JUNE 30, 2011
(AUDITED)
Total assets 28,308,137 26,811,627
Total liabilities 12,591,505 12,237,967

NINE MONTHS ENDED (MARCH 31)

INDICATORS 2012 2011
Net sales 53,934,165 45,287,935
Administrative expenses 420,637 308,120
Profit before taxation 4,276,562 2,482,291
Profit after taxation 2,894,189 1,602,550
Earnings per share - basic and diluted (Rs) 36.82 20.39

FUTURE OUTLOOK

It is expected that the demand of company's products in market will remain strong in view of the customers' preference for Toyota products and services. However, the management of the company remains alert to enhance operational effectiveness and mitigate the environmental risks.