Indus Motors Reports Record Sales and Profits in 2012

Indus Motor Company earned Rs. 4.3 billion in net income on sales of Rs. 75 billion in 2011-12, representing an increase 57% in net income and 25% in total revenue over previous year. The company that is 37.5% owned by Japan’s Toyota Motors sold over 55,000 cars during the financial year that ended on June 30, 2012, its highest ever for a single year. Both revenues and profits were the highest in the company’s history in Pakistan, according to media reports. Pakistan's total car market was about 235,000 units in July 2011-June 2012 period.

The domestic auto industry sold 178,753 cars, 23% more than last year. The rest of the demand was met by imports of 55,000 cars in fiscal year 2012, representing an increase of 50% over last year. In addition to durables like automobiles, companies in FMCG (fast moving consumer goods) sector are also expected to report strong sales and earnings this year. Engro Foods has emerged emerged as the supercharged FMCG player with over 400 percent in bottom line in 2011, grabbing fourth position after Nestle, Unilever and Rafhan, and outpacing National Foods. The sector growth has been particularly well supported by strong rural consumption in recent years.

Here are a few key points excerpted from a recent Businessweek story on rise of the rural consumer supported by higher crop prices in Pakistan:

1. Unilever and Colgate-Palmolive Co. are sending salespeople into rural areas of the world’s sixth most-populous nation, where demand for consumer goods such as Sunsilk shampoo, Pond’s moisturizers and Colgate toothpaste has boosted local units’ revenue at least 15 percent.

2. “The rural push is aimed at the boisterous youth in these areas, who have bountiful cash and resources to increase purchases,” Shazia Syed, vice president for customer development at Unilever Pakistan Ltd., said in an interview. “Rural growth is more than double that of national sales.”

3. Consumer-goods companies forecast growth in Pakistan even as an increase in ethnic violence in Karachi has made 2011 the deadliest in 16 years for the country’s biggest city and financial center.

4. Nestle Pakistan Ltd. is spending 300 million Swiss francs ($326 million) to double dairy output in four years, boosted sales 29 percent to 33 billion rupees ($378 million) in the six months through June. “We have been focusing on rural areas very strongly,” Ian Donald, managing director of Nestle’s Pakistan unit, said in an interview in Lahore. “Our observation is that Pakistan’s rural economy is doing better than urban areas.”

5. Haji Mirbar, who grows cotton on a 5-acre farm with his four brothers, said his family’s income grew fivefold in the year through June, allowing him to buy branded products. He uses Unilever’s Lifebuoy for his open-air baths under a hand pump, instead of the handmade soap he used before. “We had a great year because of cotton prices,” said Mirbar, 28, who lives in a village outside south Pakistan’s Matiari town. “As our income has risen, we want to buy nice things and live like kings.”

6. Sales for the Pakistan unit of Unilever rose 15 percent to 24.8 billion rupees in the first half. Colgate-Palmolive Pakistan Ltd.’s sales increased 29 percent in the six months through June to 7.6 billion rupees, according to data compiled by Bloomberg. “In a generally faltering economy, the double-digit growth in revenue for companies servicing the consumer sector has come almost entirely from the rural areas,” said Sakib Sherani, chief executive officer at Macroeconomic Insights Pvt. in Islamabad and a former economic adviser to Pakistan’s finance ministry.

7.6 billion rupees, according to data compiled by Bloomberg. “In a generally faltering economy, the double-digit growth in revenue for companies servicing the consumer sector has come almost entirely from the rural areas,” said Sakib Sherani, chief executive officer at Macroeconomic Insights Pvt. in Islamabad and a former economic adviser to Pakistan’s finance ministry.

7. Unilever is pushing beauty products in the countryside through a program called “Guddi Baji,” an Urdu phrase that literally means “doll sister.” It employs “beauty specialists who understand rural women,” providing them with vans filled with samples and equipment, Syed said. Women in villages are also employed as sales representatives, because “rural is the growth engine” for Unilever in Pakistan, she said in an interview in Karachi. While the bulk of spending for rural families goes to food, about 20 percent “is spent on looking beautiful and buying expensive clothes,” Syed said.

8. Colgate-Palmolive, the world’s largest toothpaste maker, aims to address a “huge gap” in sales outside Pakistan’s cities by more than tripling the number of villages where its products, such as Palmolive soap, are sold, from the current 5,000, said Syed Wasif Ali, rural operations manager at the local unit.

9. Palmolive's detergents Bonus Tristar and Brite are packed in sachets of 20 grams or less and priced as low as five rupees (6 cents), to boost sales among low-income consumers hurt by the fastest pace of inflation in Asia after Vietnam. Unilever plans to increase the number of villages where its products are sold to almost half of the total 34,000 within three years. Its merchandise, including Dove shampoo, Surf detergent and Brooke Bond Supreme tea, is available in about 11,000 villages now.

10. Telenor Pakistan Pvt. is also expanding in Pakistan’s rural areas, which already contribute 60 percent of sales, said Anjum Nida Rahman, corporate communications director for the local unit of the Nordic region’s largest phone company.

 Undeterred by the gloom and doom reports in the media, Pakistani consumers are continuing to spend and private consumption has now reached 75 percent of GDP. It rose 11.6% in real terms in 2011-12 compared with just 3.7% growth a year earlier , according to Economic Survey of Pakistan. In fact, many analysts believe that Pakistan's official GDP of  $220 billion is understated by as much as 50%, buttressing a recent claim by the head of Karachi Stock Exchange that Pakistan's real GDP is closer to $300 billion.

I believe that even a modest effort to increase tax collection can significantly improve Pakistan's state finances to support higher public sector investments in energy, education, health care and infrastructure.
 Related Links:

Haq's Musings

Pakistan's Underground Economy

Tax Evasion Fosters Aid Dependence

Poll Finds Pakistanis Happier Than Neighbors

Pakistan's Rural Economy Booming

Pakistan Car Sales Up 61%

Resilient Pakistan Defies Doomsayers

Land For Landless Women in Pakistan


Riaz Haq said…
Here are some excerpts of BMI's Q3-2012 auto report for Pakistan:

The Pakistan Autos Report provides industry professionals and strategists, corporate analysts, auto associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Pakistan's automotive industry.

The Pakistan autos sector continues to present a mixed picture as we approach the end of the country’s fiscal year in June 2012. While the outlook for passenger cars and pick-ups remains robust, with strong growth seen in both production and sales year to date, the country’s sluggish commercial vehicle sector and plunging farm tractor sector are acting as brakes on the progression of the wider vehicle industry.

According to figures from the Pakistan Automotive Manufacturers Association (PAMA), for the nine months ending March 31 2012, a total of 154,573 four-wheeled vehicles (passenger cars, trucks, buses,
LCVs, jeeps, pick-ups and tractors) were produced in Pakistan, marking a 9% decline on the 169,743 four-wheeled vehicles produced in 9MFY11. Over the same period, a total of 156,877 four-wheeled vehicles were sold in Pakistan, down 5% on the 164,820 four-wheeled vehicles sold in 9MFY11.

The main cause of the drop in both sales and production was the government’s decision in March 2011 to impose a 16% general sales tax on tractor purchases, which were previously GST-exempt. This saw demand from farmers collapse over H1FY12, leading to Fiat’s tractor production dropping by 236% y-oy over the six-month period, while Massey Ferguson’s tractor output was down by 109% y-o-y.

Since that time, the government has revised its decision, reducing the GST levied on tractor sales down to 5% as of January 2012. This reduction in GST has had a swift impact on both production and sales from Fiat and Massey Ferguson. From a year-low of just four tractors produced in January 2012, Fiat had returned to over 2,000 units produced in March 2012. Similarly, Massey Ferguson has returned production to over 4,000 in March 2012, from a year-low of 963 in November 2011. At the same time,
monthly sales figures have improved from a year-low of just 369 for January 2012 (for both Fiat and Massey Ferguson) to 6,229 as of March 2012. However, with the government still planning to increase GST on tractors to 10% in 2013 and then to 16% in 2014, it remains to be seen what effect these staggered tax hikes will have on tractor sales over the medium term.

Without the negative impact of the GST rise, then FY12 would have been a very strong year for the Pakistani auto sector. As it is, there is now scope for the industry to make back some of its losses by yearend,
although tractor production and sales will still be down sharply year-on-year. Our current forecasts call for a total of 205,335 vehicles produced in Pakistan in FY12 and 203,504 vehicles sold.

Looking at manufacturers, Pak Suzuki has had a very strong year, profiting to some extent from the difficulties being experienced by Honda Atlas, which had to temporarily suspend local production of the City and Civic models owing to a lack of spare parts from parent company Honda following the Thai flooding. Indeed, while Honda Atlas saw a 37.5% fall in production over 9M11, to 7,798 units and a 43.3% fall in local sales, to 7,999 units, Pak Suzuki saw a 26.2% increase in production, to 65,692 units and a 36.9% increase in local sales, to 68,722 units. The third local passenger car manufacturer, Indus Motor (Toyota/Daihatsu) has seen essentially flat performance over FY12 to date, with production up by 0.7%, at 36,549 units and sales up by 1.5%, at 36,000 units.
Riaz Haq said…
Here's a BR report on Pakistan tractor industry:

Currently, Millat Tractors and Al-Ghazi Tractors Limited are two of the largest producers of tractors and other agricultural implements within the country, with their total production of tractors standing around 65 thousand units at the end of FY11. With an annual installed capacity of 75 thousand units, the tractor manufacturing industry has been performing relatively consistently over the last few years contributing towards the upgradation of local farming practices. With the number of tractors in agricultural use in Pakistan rising from 5,500 in 1961 to 470,000 in 2007 according to World Bank data, the number of local producers engaging in selective mechanisation has also been on a consistent rise. However, the start of the current fiscal year brought bad news for both manufacturers and farmers as a hike in GST on tractor sales brought down production by a staggering 70 percent resulting in negative growth of 2.2 percent in production during this period. With tractor sales dipping as low as 78 percent month-on-month at one point and just 771 units being sold in December 11 as compared to the 3,625 units sold during the previous month, the industry faced a severe crisis with thousands of unsold tractors parked at factories and dealership networks across the country. The government subsequently announced a cut back in GST to a modest 5 percent in January 2012, following which sales have risen up sharply once again. With total units sold jumping from a dismal 369 in January to 8,906 in February following the tax cut, the sectors productivity is on the rise again. Further abetments have been provided in the form of incentives provided to small farmers aiding them in tractor purchases through different schemes such as the Sindh Tractor Scheme where the government distributed six thousand units to farmers at subsidised rates during April-May12. Moreover, the future for the tractor industry looks robust in the future with Millat Tractors already having booked 25 thousand units for the next six months, according to a report compiled by IGI Securities. This news bodes well for all stakeholders as the net return of these investments into mechanisation of agricultural machinery has always been positive in terms of crop output. What is essential at this point is to reiterate the importance of long-term policy commitments by the government to ensure that upgradation of farming practices is made within the reach of the average local producer. In a country where demand for increased food production follows logically from an ever increasing population, facilitating primary producers in obtaining machinery to increase output should be of consummate importance. Consequently, with the terms of the current Auto Industry Development Programme expiring at the end of June 2012, it is suggested that the Government should undertake new initiatives to foster dissemination of tractors and other farm machinery in the country.
Riaz Haq said…
Here's a BR report on telecom equipment imports in Pakistan:

The imports of various telecom products witnessed increase of 23.89 percent during the fiscal year 2011-12 as against the same period of the previous year.

The over all imports of telecom sector reached to US$1.268 billion during July-June (2011-12) against the imports of US$ 1.023 billion recorded during July-June (2010-11), according to data of Pakistan Bureau of Statistics.

Among the telecom sector, the highest increase of 31.63 was witnessed in mobile phones, imports of which increased from US$ 522.825 million to US$688.170 million, the PBS data revealed.

The imports of other telecom apparatus increased from US$500.712 million to US$579.899 million, showing increase of 15.81 percent.

Meanwhile, during the month of June 2012, the telecom imports increased by 13.04 percent as compared to the imports of June 2011 while decreased by 20.43 percent when compared to the imports of May 2011.

The telecom imports in June 2012 stood at US$ 96.680 million against the imports of US$ 85.527 million in June 2011 and US$ 121.499 in May 2012, the data revealed.

During the month under review, the mobile phone imports surged 25.63 percent when compared to the imports of June 2011 and decreased by 11.17 percent when compared to the imports of May 2012.

In June, the mobile phone imports were recorded at US$ 56.176 million against the imports of US$ 44.714 in June 2011 and US$ 63.237 in May 2011.

However, in June 2012, the imports of other telecom apparatus decreased by 0.76 percent and 30.48 percent as compared to the imports of June 2011 and May 2012.

The imports of telecom apparatus in June 2012 stood at US$ 40.504 million against the imports of US$ 40.813 million in June 2011 and US$ 58.262 million in May 2011, the data revealed.

It is pertinent to mention here that the overall impost from the country during the fiscal year 2011-12 increased by 11.13 percent.

The imports during the year under review were recorded at US$ 44.912 billion against the imports of US$40.414 billion, according to the PBS data.
Riaz Haq said…
Here's a Dawn report on Karachi stocks hitting 4 year highs:

Pakistan’s main stock market closed at a four-year high on Wednesday as investors cheered the central bank’s decision to cut its key policy rate, dealers said.

The Karachi Stock Exchange benchmark 100-share index gained 58.95 points, or 0.4 per cent, to close at 14,970.92, its highest close since April 2008. The volume of shares traded was 135.996 million.

“The positive trend in the market is because of the cut in the discount rate by the State Bank (of Pakistan) last week,” said Shuja Rizvi, a trader at Al-Hoqani Securities.

“The rise we saw today was a continuation of the rally on Monday.”

The State Bank of Pakistan in its monetary policy announcement on Aug 10 lowered its key policy rate from 12 per cent to 10.5 per cent.

In the currency market, the rupee strengthened slightly to close at 94.32/39 to the dollar, compared with 94.42/48 on Monday. Financial markets in Pakistan were closed on Tuesday for the Independence Day holiday.

Overnight rates in the money market closed lower at 8.50 per cent, compared with 10.40 per cent on Monday.
Riaz Haq said…
Here's Gulf News on growth of upscale real estate developments in Pakistan:

Apart from ultra-modern residential and commercial projects undertaken on a massive scale, the concept of gated communities ensconced in the lap of extravagance isn’t just changing the dynamics of Pakistan’s luxury realty segment, but also the way residents of these projects are living in the country’s major cities like Karachi, Islamabad and Lahore. “The luxury property market in Pakistan has traditionally been unorganised and fragmented. However, the recent past has seen consolidation of a few developers who are stretching their capacities to the maximum to meet the growing market demand,” says Naveed Merchant, Managing Director, Merchant & Associates.

“REIT [real estate investment trust] regulations are in the process of formulation which will encourage large projects with sourced financing. While the Pakistan real estate market still lacks transparency and liquidity compared to more mature real estate markets, REITs would provide an opportunity to diversify the investor base in the sector through a regulated, tradable investment,” he says.

Nida Zahoor, Group Marketing Manager, Bahria Town, touted to be Asia’s largest private real estate developer, also vouches for this maturity in the market. “Generally the Pakistani luxury home buyer in this day and age, expects nothing but the best in quality. Most of them have travelled extensively to countries abroad, making them abreast with the latest trends in construction. Then there is also the growing middle class which is not as aware, but that too is changing over time” she says.

Zahoor says there is a shortage of one million homes in Pakistan with a 0.6 million (backlog) demand growing every year, which includes in it a large ratio of demand for luxury homes. In the next five years, predicts Zahoor, Pakistan will experience a tremendous growth in the luxury realty segment as awareness among the people, the trends, the policies by the government will give a fillip to this segment. So, what would Bahria Town’s benchmark project be? “It would be Bahria Golf City, Pakistan’s first ever branded luxury resort designed over a total area of 5.5 million square metres,” Zahoor says.

Bahria Golf City is expected to accommodate 18,000 people in about 7,500 housing units. “From architects such as BEAMS construction to Nayyar Ali Dada, interior designers such Wingchair, Cracknel landscape designers; and Kroll security consultants; we are working with the best in the world who have been involved in prestigious projects like the Burj Al Arab, KL towers, Atlantis Dubai and Jumeirah Beach Resort,” says Zahoor.

Bahria Town isn’t the only player in the market, there are several interesting offerings such as Lake City, a 2,104-acre development on the outskirts of Lahore, which has a plan to have almost 4,000 residences, hundreds of shops, malls and dozens of office buildings. “When the project was envisaged in 2004, it was obvious that future developments in real estate in Lahore could only take place towards the south and south west. The trend in Pakistan, outside Karachi, is not towards vertical expansion but horizontal expansion,” says Farouk Khan, ED Coordination, Lake City Holdings and Rida Sarfraz, GM Marketing and Events, Lake City Holdings.

Besides, there are other attractive projects such as Defence Raya, a 400-acre development and The Centaurus, a project featuring a five-level shopping mall, two residential complexes, the corporate complex and a luxurious five-star hotel in Islamabad...
Riaz Haq said…
Bata shoe company in Pakistan reports higher profits, according to Business Recorder:

The profit after tax of Bata Pakistan Limited has increased to Rs 472.704 million in the half year period ended on June 30, 2012 as compared to Rs 375.722 million earned in the corresponding period in 2011. The board of directors of the company in its meeting held on Monday declared that the company's earning per share has increased to Rs 62.53 in the period under review against Rs 49.70 in the same period last year.

According to the financial results sent to Karachi Stock Exchange the company's net sales increased to Rs 5.189 billion against Rs 4.434 billion. The cost of sale increased to Rs 3.187 billion against Rs 2.754 billion. The company's profit before taxation increased to Rs 626.731 million in the first half of 2012 against Rs 509.879 million in the same period last year.

On quarterly basis, the company's profit after tax increased to Rs 300.370 million translating earning per share of Rs 39.73 in the quarter ended on June 30, 2012 as compared to after tax profit of Rs 205.625 million with per share earning of Rs 27.20 in the corresponding quarter in 2011.
Riaz Haq said…
Here's an ET story on middle class powering FMCG growth in Pakistan:

Procter & Gamble (P&G), one of the world’s largest consumer goods company, has recognised Pakistan as one of the top 10 emerging markets to focus investment in. This sounds like good news for our cash-strapped economy, and it is equally good news for those who have invested in P&G.
It makes sense for any fast moving consumer goods (FMCG) to invest in a country where the world’s biggest consumer goods names – Unilever, P&G, Nestle and Mondel-z (formerly Kraft Foods) – are not only operating, but also growing significantly.
According to the State Bank of Pakistan, the net profits of FMCG companies listed on the Karachi Stock Exchange grew in excess of 20% in fiscal year (FY) 2011-12. P&G, which is not listed on the KSE, has witnessed tremendous growth in revenues during the past three years – including 50% revenue growth in FY2012. Besides the consumer goods sector, its supporting industries like packaging and distribution companies have also seen their toplines grow significantly.
So what are the factors contributing to this growth?
If the fact that these companies are selling essential food items and consumer goods in the world’s sixth-largest market by consumer size is not satisfying enough for you, here’s a more detailed and nuanced explanation.
“Economics and demographics are together at play in Pakistan,” P&G Pakistan Country Manager Faisal Sabzwari told this correspondent in a recent interview. The boom in the rural economy has also been a major contributor to their growth – thanks to a series of bumper crops of agricultural produce and wheat support prices, which were raised by the government in recent years.
Besides this, according to Sabzwari, Pakistan is one of the top countries adding 20-somethings to its workforce; these are the people establishing families, getting new jobs and helping market sizes grow.
“We have millions of consumers entering independent disposable income space in their lives every year,” Sabzwari said, while referring to the growing middle class.
The market size in Pakistan has also grown in terms of volumes, without taking pricing into account. “Increasing urbanisation and the growing middle class are key drivers of the FMCG business,” Sabzwari said.
Pakistan’s is urbanising faster than other developing countries, according to Sabzwari. “The country’s population is growing at under 3%, while the rate of migration to urban centres is even higher,” according to Muzammil Aslam, managing director at Emerging Markets Rsearch.
“A population base of 180 million talented and hard-working people hungry for prosperity ensures that nothing can hold this country back from growing,” P&G Pakistan’s chief said. While looking at the growing middle class, he said, it is important to look at their consumption habits. “We are exposing more consumers to value brands like Pampers and Always,” he explained.
It may be added here that consumer spending in Pakistan has increased by an average of 26% in three years, according to a Bloomberg report published on November 21, 2012 – a strong sign that people are consuming more goods than ever before.
This rise in consumer demand has spurred the growth of supermarkets across major urban centres, which include, but are no longer limited to Karachi, Hyderabad, Multan, Lahore, Faisalabad and Islamabad.
Such superstores are getting larger and asking manufacturers for broader brand portfolios in order to serve their customers better. They have larger shelves, enabling them to have more sophisticated and developed categories in which they can stock more products than ever before....

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