Indus Motors Company Limited (INDU) has proposed the government to suspend payments to customers due to delayed deliveries, which are currently set at KIBOR+3%.
In a corporate briefing on Friday, May 05, 2023, the management of the company highlighted its 3QFY23 financial results. The company reported a Profit After Tax (PAT) of PKR 3,216 million (EPS: PKR 40.92), up by 142% QoQ. The surge in profit can be attributed to a significant improvement in gross margins (+730bps QoQ), which resulted in an operating profit after two consecutive quarterly operating losses during FY23. Alongside the financial results, INDU declared an interim cash dividend of PKR 24.4/share.
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However, the volumetric sales of INDU went down by 55% YoY due to lower production resulting from the unavailability of parts amid import restrictions. The gross margin for 9MFY23 was recorded at 0.15%, down by 875 bps YoY (9MFY22: 8.6%), which led to an operating loss. This decline in gross margins was due to the depreciation of the PKR. Nonetheless, the company was able to recover its gross margins, recording 6.3% during 3QFY23, as compared to -1% in 2QFY23, by passing on the impact of currency depreciation to end customers through higher car prices.
During 9MFY23, the company’s lower profitability was compensated by higher other income, which was recorded at PKR 11.6 billion (+51% YoY) due to higher returns on short-term investments as interest rates remained elevated. The SBP import restrictions and the volatile exchange rate remained a challenge for the company, resulting in frequent plant shutdowns.
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To counter the impact of the import restrictions, the management of INDU has reduced vehicle bookings in the past 8-9 months, leading to a decline in consumer advances and short-term investments. Nevertheless, the management stated that work on the Hybrid facility is in progress, and the HEV vehicle is expected to be launched by the end of next year.
