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November 12, 2019

IMC to operate in single shift till December to tackle slowdown

Business

November 12, 2019

KARACHI: KARACHI: The Indus Motor Company (IMC) will operate on single shift basis – 40 percent of its rated capacity till December 2019 -- to keep costs in check and combat slumping sales as the industry’s slowdown is expected to continue in the first half of the current financial year.

The company management at analysts briefing held on Friday said it hoped that the conditions would improve during the second half of FY20 owing to further stabilisation of the economy, particularly exchange rate, and expected reduction in interest rate.

IMC, which makes Toyota vehicles in the country, had to shut down its plant at bin Qasim for 15 days in September, while in August there were 12 such days, and eight in July.

The management identified increased emphasis on documentation by the government as a primary factor adversely impacting sales volumes. Moreover, the company considers high interest rates and decline in purchasing power of customers as secondary factors in impairment of demand.

With regards to industry demand, combined sales of new and used cars declined 49 percent to 40,279 units during the quarter. IMC’s sales clocked-in at 6,892 units during Q1FY20 as compared to 15,631 units sold during Q1FY19.

“The company anticipates total industry demand to clock-in at 160,000-170,000 units during FY20 as compared to 240,000 units recorded during the previous fiscal year,” a report issued by Pearl Securities noted.

Next Capital in its report said, “Rural market is still driving IMC’s sales as it constitutes 60 percent of the total sales whereas urban market accounts for 40 percent sales.”

Despite significant crop losses recently, prices of commodities have shot up owing to which the company does not believe further decline in sales from the rural market.

The IMC management was going for aggressive campaigns and recently held a campaign with Bank Alfalah, which resulted in additional sales of 150 units in October 19. With this campaign the sales from financing have shot up to 35 percent, which were around 19-20 percent for the company, it was noted at the briefing.

“With respect to pricing, considering stability in exchange rate along with focus of the company towards supporting volumes, the management does not expect prices to be further increased during 2QFY20,” the report said.

With regards to inventory, there were around 2,000 cars still unsold, and the situation would normalise towards the end of 3QFY20, the IMC management said.

Regarding the recently approved electric vehicle policy under which the government might impose lower taxes on electric vehicles, the IMC management said it wanted a policy that focused more on local production rather than concessions on CBU imports. “Exact details of the policy are still awaited,” it said.

With regards to industry demand, combined sales of new and used cars declined 49 percent to 40,279 units during the quarter. IMC’s sales clocked-in at 6,892 units during Q1FY20 as compared to 15,631 units sold during Q1FY19.

The company’s profit after tax declined 62 percent to Rs1.318 billion in Q1FY20 compared with Rs3.508 billion recorded during the same quarter of last year.

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