Indus Motor : Transmission of Quarterly Report for the Quarter and Nine months ended March 31, 2023

Contents

02 Directors' Report

1. Condensed Interim Statement of Financial Position
2. Condensed Interim Statement of Profit or Loss
3. Condensed Interim Statement of Comprehensive Income
4. Condensed Interim Statement of Cash Flows
5. Condensed Interim Statement of Changes in Equity
6. Notes to and Forming Part of the Condensed Interim Financial Statements

1. Company Information

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Directors' Report

For the Nine months and Quarter ended March 31, 2023

The Directors of Indus Motor Company (IMC) Limited are pleased to present the un-audited Company accounts for the quarter and nine months ended on March 31, 2023.

Pakistan's Automobile Industry

The overall economy has experienced a slow down during the current fiscal year. The country's economic outlook remained unfavourable during the period due to major contributing factors such as an increase in current account deficit, depletion of foreign exchange reserves and severe inflationary pressures. The Government's continued attempts to control the ever-increasing inflation by increasing interest rates; and its attempt to narrow the current account deficit through the introduction of import containment policies; has significantly impacted the auto- sector of the country. Consequently, the auto-sector has operated at below 50% production capacity, leading to frequent plant shutdowns observed during the nine-month period ended on March 31, 2023.

During the period, the auto-sector also experienced a contraction in demand due to a decline in consumer purchasing power, excessive interest rates and increases in the price of vehicles. The vehicle prices were increased on account of severe devaluation of PKR impacting input costs of materials, as well as increased duties and taxes during the period.

During the nine months ended March 31, 2023, the total sales of PAMA members for locally manufactured Passenger Cars (PC) and Light Commercial Vehicles (LCV) decreased by 46% to 110,405 units, as against 205,452 units sold in the corresponding period last year. PAMA member's total production of locally manufactured PCs and LCVs for the nine months of the fiscal year also decreased by 43% to 113,758 units, as against 199,109 units produced in the corresponding period last year.

Company Review

The combined sales of Completely Knocked Down (CKD) and Completely Built-up Units (CBU) vehicles of the Company for the nine months period ended March 31, 2023, decreased by 55% to 26,055 units as against 57,367 units sold in the corresponding period last year. The market share of the Company in the overall market stood at approximately 23% with respect to PAMA players for the nine months period ended March 31, 2023. Moreover, sales for the quarter ended March 31, 2023, decreased by 60% to 7,383 units as against 18,735 units sold in the same quarter last year. The Company produced 26,848 vehicles during the nine months of the fiscal year, registering a 51% decrease, as compared to 55,192 units produced in the same period last year. The company experienced a decline in production during the period primarily due to restrictions on the import of CKD kits and limitations in vendor supply chains, forcing the company to conduct regular plant shutdowns during the period.

The Company's net sales turnover for the nine months period ended March 31, 2023, decreased by 33.6% to Rs. 135.03 billion, as compared to 203.41 billion in the same period last year, while

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Directors' Report

For the Nine months and Quarter ended March 31, 2023

profit after tax also decreased by 61.8% to Rs. 5.84 billion, as against Rs. 15.29 billion achieved in the corresponding period last year. The decline in net profit was primarily due to lower sales volumes for CKD and CBU vehicles, and an increase in input costs which were driven by severe devaluation of PKR against USD and rising production costs. However, the negative impact on the net profit, was offset by higher other income, resulting from higher interest rates compared to the same period last year.

During the quarter ended, March 31, 2023, the Company received various accolades, such as the "Corporate Social Responsibility Award 2023" by the National Forum for Environment & Health (NFEH), 1st Prize in the "Multinational Category for Living the Global Standards Business Sustainability Award 2022" by the UN Global Compact Network Pakistan (UNGCNP) and, four awards in the categories "Business Leader", "Reporting & Transparency", "Employee Volunteer Program", & "Corporate Community Partnerships" under the banner of Corporate Social Responsibility Awards 2023 by The Professionals Network (TPN).

The Earnings Per Share (EPS) of the company for the nine-month period ended March 31, 2023, is Rs. 74.35 in comparison to Rs. 194.56 reported in the same period last year. Despite the challenging quarter faced by the Company in terms of volumes and profitability, the Board of Directors is pleased to declare a third interim cash dividend of Rs. 24.40 per share for the quarter, this making the total dividend for the nine months ended March 31, 2023 of Rs. 42.80 per share, as compared to Rs. 90.50 per share, for the same period last year. During the period, transactions with the related parties as disclosed in the financial statements were carried out in the ordinary course of business.

Near-Term Business Outlook

The automotive industry continues to experience a significant downturn due to the uncertain economic and business climate. The government is struggling to establish a consistent framework to stabilize the economy as mounting political tensions and depleting forex reserves exacerbate the situation. Although some progress has been made towards completing the 9th review under the IMF's Extended Fund Facility (EFF) program, the inability to conclude it has resulted in continued pressure on the balance of payments and forex reserves. Furthermore, the ongoing economic crisis has prompted the World Bank to revise down the country's growth forecast for the current fiscal year from 2% to 0.4%.

The auto-industry will likely experience a further deterioration in demand going forward. The continued volatility of PKR against the US Dollar, tighter fiscal and monetary measures and excessive inflation, coupled with low consumer purchasing power may continue to negatively impact the auto sector sales volumes in the upcoming periods. Moreover, continued restrictions on the import of raw materials and components for the auto-sector will continue to force frequent plant shutdowns, resulting in low sales volumes.

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Directors' Report

For the Nine months and Quarter ended March 31, 2023

The Company acknowledges that the current economic situation is unprecedented, and appreciates that it calls for some drastic actions and measures from the Government. However, the Company urges the Government to permit the necessary imports for the auto-sector, to maintain production levels at least at 50% of last fiscal year i.e. FY 21-22 levels. This would at least ensure survival of the automotive sector and help to safeguard the jobs of over three million workers directly and indirectly employed in the industry. The Company also requests consistency in policy making, particularly regarding the Hybrid incentives provided in the AIDEP 2021-26. The Company has already made significant investments in Hybrid vehicles based on these incentives, and the progress of the investments are in accordance with the planned schedule.

The Company remains steadfast in its unwavering commitment to prioritize the needs of our customers, reflecting our 'Customer First' philosophy. We uphold the values of active involvement, unwavering dedication, and operational efficiency across all levels of our organization to ensure optimal customer satisfaction throughout the entire supply chain.

Acknowledgement

We are grateful to our customers for their trust and continued patronage of our products, and wish to acknowledge the continuous and dedicated efforts of its employees, vendors, dealers and all business partners, even during these challenging and unprecedented times. We extend our gratitude to all our stakeholders and shareholders who have always supported the Company.

We bow to the Almighty, and pray for His blessings and guidance.

On behalf of the Board of Directors.

April 20, 2023

Karachi.

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