Major automaker Indus Motors (PSX: INDU) has come out of the tough fiscal year fairly unscathed. In 1H, earnings were down 6 percent, but by 9M, they had fallen by 13 percent. In the last quarter, earnings are down 19 percent which translates to a year long decline of 13 percent. The last quarter has been troubling for the entire industry but Indus' performance has been better on the back of relatively smoother demand and frequent price hikes. Comparatively, peers like Suzuki has turned a loss in its quarter ending Jun-19 while Honda's earnings fell by 77 percent.

No doubt the cost scenario has changed dramatically- which, according to the company, led to price increases as well. Rupee depreciation has escalated cost of import. The company imports CKD kits for assembly and CBUs for direct sales as well. Based on assembled units reported by PAMA, volumes grew 4 percent. Based on that, revenues per unit have increased by 9 percent. Cost per unit sold increased by 16 percent. However, these numbers may be skewed as PAMA only records units assembled locally, and does not account for company's CBU sales.

The company's income statement implies that price increases together with prevailing demand was not enough to meet the added cost pressures. Local auto parts makers also import materials from abroad so inflationary pressures have also come in due to domestic prices. As a result, the company's margins suffered.

Demand for flagship Corolla remained strong toward the start of the year but was eventually hit by declining purchasing power of consumers and rising cost of borrowing. In full-year, it still registered a positive growth. Hilux and Fortuner sales dropped long before. The latter is a luxury product which means when incomes go down, people buy less of.

The company has also kept its purse strings tight keeping all administrative and distribution expenses as share of revenues in line with last year which in an inflationary environment is a positive sign. The company's dividend payout reduced from last year, though evidently, the company is still strong enough to pay over 60 percent of its earnings.

Copyright Business Recorder, 2019