General

Top car mechanic suffers from government measures

automobile assembler

Auto mechanic, Indus Motor Company Limited held a company briefing session on 27e September 2022 to discuss FY22 financial results and future prospects.

As shared by Arif Habib Limited, the company posted a profit of PKR 15.8.2 million in FY22, a 23 percent year-over-year increase from PKR 12,829 million in FY21.

Read more: Despite a huge blow to profits: Indus Motors profit rises by 23 pc

However, lower gross margins and the imposition of super taxes had a major impact on the company during the last quarter as profits in that quarter were massively inflated, reflecting a decline of 88 percent year-over-year and 90 percent quarter-over-quarter. .

When discussing the company’s financial performance, management emphasized that it has consistently delivered high auto sales in FY22, clocking in at 75,611 units compared to 57,731 units in the same period last year. While the company posted sales of 17,966 units in the last quarter of FY22, compared to 14,566 units in the last quarter of FY21.

Despite higher sales volume, Indus Motor Company recorded a massive decline in gross margins, which recorded 1.16 percent in the last quarter of FY22, compared to 12.28 percent in the last quarter of last year. This was attributed to higher international commodity prices and the depreciation of PKR against the US dollar.

Read more: IMC and MTL announce shutdown!

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

Due to the restriction on raw material imports, the factory is running at 40 to 40 percent of capacity. Management expressed the expectation that if restrictions are lifted completely, the company will be able to fulfill the purchase orders within 2-3 months.

Management also shared their forecast that auto industry sales would fall 40 percent, to about 200,000 units in FY23.

In the first quarter of FY23, the company struggles to break even as a result of: i) demand being held back by higher auto-financing rates in the rising interest rate scenario, ii) higher production costs due to currency depreciation, and iii) constraint of commodities imports by the State Bank of Pakistan.

The auto sector, which is involved in assembling by importing raw materials, has suffered greatly from the restrictions imposed by the government to curb the import bill. However, the management does not foresee any relaxation from the government for the car sector in the short term.