Indus Motor profit declines39 percent on dented sales

KARACHI: Indus Motor Company (IMC), one of the top auto manufacturers in Pakistan, on Monday reported a 39 percent decline in its net profit for the year ended June 30,2023, owing to a drop in sales.

In a statement to the Pakistan Stock Exchange (PSX), the company reported a net profit of Rs9.664 billion for the year ended June 30, down from Rs15.801 billion the previous year.

The company also announced a final cash dividend of Rs29/share, which is in addition to the combined interim cash dividend at Rs42.80/share already paid. Earnings per share (EPS) came in at Rs122.96, compared with Rs201.04 last year, the PSX notice showed.

The company said its revenue for the year decreased to Rs177.710 billion, compared with Rs275.505 billion a year earlier.

Indus Motor’s said its other income for the period rose to Rs14.179 billion, compared with Rs12.935 billion the previous year. Sales volume of completely knock down units (CKD) and completely built units (CBU) vehicles decreased by 58 percent, to 31,602 units as against 75,611 units sold last year.

The company produced 32,696 units for the year, as compared to 72,438 units produced last year. The decline in turnover and profitability was mainly due to lower sales volume of CKD and CBU vehicles, on account of import restrictions and demand contraction. Profitability for the year also declined due to an increase in input costs, mainly driven by the severe devaluation of the Pakistani rupee against the US dollar and high inflation impact.

The negative impact on the net profit was partially offset by higher return on investments, on account of the increase in interest rates.

Expressing his views, IMC Chief Executive Ali Asghar Jamali said, “In light of the prevailing circumstances, the automobile industry in Pakistan is facing the worst-ever economic downturn.”

During the year, local and global disruptions along with import restrictions on CKD kits, resulted in plant closures, thereby affecting employment in the industry.

“The cumulative effect of currency devaluation, soaring inflation, rising interest rates and increase in duties and taxes, forced the industry to escalate car prices, which have gone beyond customer reach, thereby, resulting in continuous demand contraction,” Jamali added.

Presently, the IMC production facility is temporarily closed as a result of considerable supply chain disruptions and low demand for vehicles.

A two-week shutdown was notified for the end of July and early August as well because of similar challenges with raw material imports.

Fiscal year 2022-23 has been challenging on account of the economic environment, low consumer purchasing power and increase in duties and taxes by the federal government, which has dented the demand for the auto sector.