Indus Motor profits decline by 62% in the 1st quarter of FY 2019-20

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Toyota Indus Motor Company Limited (IMC) released its profit stats, which reveal that the company’s profits have declined by a whopping 62% in the first quarter of the ongoing fiscal year 2019-20.

According to the details, the Japanese auto manufacturer went through a tough time during the first quarter of FY 2019-20 that ended on 30th September 2019. The company’s profits plunged to Rs.1.318 billion, a drop of 62% as compared to its corresponding period last year. The automaker’s net sales decreased by 41% to Rs.20.7 billion as compared to Rs.34.9 billion in the same period last year. Toyota Indus shared its earnings per share (EPS) of Rs.16.78 with Pakistan Stock Exchange (PSX). During the same period in 2018, the company’s earnings per share stood at Rs.44.63, from which it earned Rs.3.508 billion. Such a considerable drop in the auto manufacturer’s net profits is primarily due to a sharp decline in auto sales volumes. According to the CEO of Indus Motor Ali Asghar Jamali, the company is striving hard to improve efficiency to encounter the challenging situation in the country. The automaker is particularly focusing on controlling its overheads to improve profit margins in a declining sales period.

Toyota Indus is also observing non-production days (NPD’s) since July this year, and so far, it has halted its production for as many as 50 days till date. The company is already operating its production plant at less than 50% of its capacity to minimize its costs during the low demand period in the market. In the first quarter of the fiscal year 2019-20, the Japanese auto giant’s production reduced by 49.7% as it produced 8036 units as compared to 15,977 units during the same period last year. The sales of all the vehicles in the local auto sector are massively down on account of higher prices of automobiles due to record depreciation of Rupee against the US dollar in the last year or so. In addition to that, the imposition of Federal Excise Duty (FED), along with other additional custom duties, has left a huge impact on car sales. A sharp rise in the interest rates of banks has also reduced auto financing substantially. Despite an increase of more than 30% in the car prices, the net profits of companies have plunged due to low sales volumes and high operating costs. Furthermore, the strict measures by the Federal Board of Revenue (FBR) have also forced the customers to restrain from purchasing vehicles.

In the July-September quarter of FY 2019-20, the finance cost of Indus Motor jumped to as high as Rs.19.5 million from Rs.9.9 million in the same period last year, a steep rise by 96.5%. During this period, the administration and the distribution expenses increased by 12% and 25%, respectively. Moreover, the other income also dipped by 34% to Rs.694.8 million, primarily due to lower short-term investments. According to the latest balance sheet stats, the investments stood at Rs.23 billion in the first quarter as compared to Rs.55 billion last year. The share price of Toyota Indus in the Pakistan Stock Exchange (PSX) also dropped by Rs.12.25 and stood at Rs.925.75 with the trading of 1940 shares. The board of directors has announced an interim cash dividend of Rs.7 per share for the quarter under review.

Note here that the sales of Toyota Corolla, which is rightly considered as the driving force of the company’s sales, have also gone down by approximately 59% in the first quarter. According to September stats, the company’s market share has also fallen to 18% as compared to 26% in its corresponding period last year. The overall situation of the local auto sector certainly demands attention from the concerned government authorities. Recently, Pak Suzuki also reported a loss of Rs.1.16 billion in the quarter ended on 30th September 2019. Let’s hope the local auto industry gets some breathing space soon.

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