INDU's assembly plant and offices are located at a 105-acre site in Port Qasim in Karachi. The product is delivered to customers across the country through a network of 37 independent 3S dealerships. Over the 24 years of the company's operations, INDU has sold over 500,000 CBU/CKD vehicles, while increasing production volumes from 20 vehicles per day in 1993 to 220 units per day currently. INDU's Corolla boosts to be the largest selling automotive brand model in Pakistan and is also considered as the 'number 1' in Toyota's Asian market.
A workforce of over 2,000 members is employed by the manufacturer. The Board of INDU comprises of nine members, with Ali S. Habib as the Chairman of the Board and Parvez Ghias and the CEO of the company.
INDUSTRIAL REVIEW The demand for autos remained suppressed during the Q3 FY14; however, there has been slight growth registered on a year-to-date basis, attributable to positive buyer sentiment as well as the impact of the government's decision to restrict used imported cars to three years. The automobile industry continues to await the Auto Industrial Development Programme-2 by the Engineering Development Board of Pakistan which was last approved in 2008. Further, the industry has also engaged in dialogues with the government over issues such as trade with India and the industry's vulnerabilities to key tax and customs duty inequities. Sales of locally manufactured passenger cars and LCVs during the last quarter fell by 20 percent to 38,967 units compared with 39,944 units during the corresponding period of previous year and considerably below the record levels of 46,623 units during March 2012.
On nine-month year-to-date basis, there was an increase of about three percent in overall volume demand to 100,220 units compared with 97,359 units that were sold during the corresponding period of FY13. Appreciation in the value of rupee has also been of benefit to the industry given the high share of imports in COGS.
OPERATING PERFORMANCE Q3 FY14 INDU registered a growth of three percent during the third quarter of the outgoing fiscal year with the combined sales of Toyota CKD and CBU at 11,631 units compared to 11,313 units during the corresponding period of previous year. On a nine-month basis, volume demand for Toyota CKD and CBU is posted at 27,031 units compared to 26,307 units last year.
Demand was driven by the launch of limited edition in the Corolla range and for commercial vehicles, supported by proactive marketing campaigns during the quarter. A new variant of Hilux Vigo Champ GX was also introduced and the company posits that it was well received by the market. The combined share of INDU for locally manufactured vehicles stood at 26 percent during the nine-month period of the outgoing fiscal year.
The company curtailed output due to suppressed market demand and took a 19-day shutdown thereby limiting production to 26,107 units for the nine-month period, compared to 25,113 units produced during the corresponding period of previous year. The demand for high end vehicles was also affected negatively owing to the imposition of 10 percent FED on the locally manufactured SUV Fortuner and full impact of higher duty including 17 percent GST in the case of Prius Hybrid CBU. Consequently, consumer demand tilted towards used imported luxury vehicles at lower customs duty valuation.
INDU registered a five percent growth in net sales revenue at Rs 44.7 billion, compared to Rs 42.7 billion during the corresponding period of last year. The company's margins increased by 34 percent during the period, posting Rs 2.3 billion compared with Rs 1.7 billion last year. Improved margins resulted from better sales volumes this year and rigid controls over fixed overheads and operational costs.
CURRENT OUTLOOK The company is expecting improved sales over the coming months on account of the launch of the new Corolla model this July and greater demand from government institutions and the corporate sector. Further, there are also expectations of rural buying by farmers as proceeds from the Rabi crop take more flow. With regards to trade with India, the company continues to expect the government to strengthen trade defence laws and their due enforcement.
The company had earlier also urged the government to take note of recommendations proposed by PAMA to be incorporated into the awaited AIDP. INDU had posited that the government is losing billions of rupees in revenue annually due to lower valuation on both used vehicles and auto parts and had also called upon the government to reconsider the valuation of used vehicles, which inhibit sales of local manufacturers.
While Coralla's sales have been weakening over the last few months, they are expected to rise with the new model and, therefore, reposition INDU's dominant position in the 1,300-cc-and-above passenger car category. Sales of Fortuner are also expected to benefit from the 10 percent reduction in FED on 1,800-cc-and-above engine sizes.
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Key Financials
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Nine months ended 31 March
Rs (mn) 2014 2013 Chg (%)
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Net sales 44764.0 42695.8 4.8
Cost of sales 40772.9 39616.5 2.9
Gross profit 3991.1 3079.3 29.6
Distribution expenses -650.8 -585.5 11.2
Administrative expenses -455.0 -470.2 -3.2
Other operating expenses 268.5 217.5 23.5
Other income 750.3 728.8 3.0
Finance costs 19.5 19.2 1.5
Profit before taxation 3347.6 2515.7 33.1
Taxation 1026.7 785.6 30.7
Profit after taxation 2320.9 1730.1 34.1
EPS-basic and diluted (Rs) 29.5 22.0 34.2
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Source: Company reports