Indus Motors estimates 15% sales dip on PKR fall

Indus Motors estimates 15% sales dip on PKR fall

KARACHI: Indus Motors Company Limited has estimated up to 15 per cent decline in car sales this year due to massive depreciation in Pakistan Rupee (PKR) value.

In a corporate briefing on Thursday, the Indus Motors informed that this year’s sales volumes remained impressive however, the company anticipates demand to receive a hit during 2022/2023 as an outcome of elevated interest rates, stringent auto financing conditions together with bloated Current Account Deficit; which will further exert pressure on exchange rate.

READ MORE: Pakistan’s car sales surge 56% in eight months of FY22

“Due to aforementioned reasons, the management is estimating sales volumes to take a dip of around 10-15 per cent. As a response to this, the company is currently operating on lower volumes,” according to analyst at Arif Habib Limited.

Management deemed upcoming year to be tough for automotive industry. It expects cost pressure to continue going forward, mainly on the back of 4 to 5 times increase in freight costs during the year together with elevated commodity prices, increased FED/sales tax and currency depreciation.

READ MORE: Pakistan’s car sales surge 61% in 7MFY22

Together with this, the management expects delay in shipments and material shortages to keep the sales volume and profitability subdued.

Highlighting the company’s financial performance management mentioned that during first half of the current fiscal year, the company’s sales volume increased by 47 per cent YoY to 38,632 units as compared to 26,362 units in same period last year (SPLY).

READ MORE: Pakistan’s car sales up monthly highest ahead price hike

During 1HFY22, sales revenue surged by 70 per cent YoY to PKR 135.2bn as compared to PKR 79.6bn in SPLY amid higher volumetric growth whilst the profit after tax increased to PKR 10,175mn (EPS: PKR 129.45), up 112 per cent YoY from PKR 4,801mn (EPS: PKR 61.08) during SPLY. The growth in profitability is an outcome of higher CKD and CBU sales together with higher other income, given higher return on investments.

On a sequential basis, company’s profitability took a dip as an outcome of rising input cost, given substantial currency devaluation, and surging commodity prices.

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While responding to the Q&A session, the management highlighted that the decline in sales volume during the month of Feb’ 22 was due to; i) production halts given the plant was shut down for one week for maintenance work and, ii) underutilization of plant capacity amid fewer working days during the month.

The management hinted price hike of around 11-12 per cent, but not until June 2022.

The management highlighted that the current month’s orders are booked up till June 2022 and that booking orders are hovering in between 4-4.5 months.