Agriauto Industries is one of the leading auto component manufacturers of Pakistan. The Company was incorporated in 1981and it is a part of one of the leading business groups of Pakistan, the House of Habib. The Company over the years through technical collaboration with leading international firms have grown to become an important part of the auto and allied industry of Pakistan.
In FY11, the Company contributed Rs 1.25 billion to the national exchequer. This hefty contribution to the national exchequer signifies the importance of the component manufacturer for both auto sector and the country.
PRODUCT RANGE The Company manufactures original equipment for the leading car, bike, tractor and other auto companies. The Company at the same time manufactures equipment for sale in the aftercare market. The company's wide product range includes high quality shock absorbers and strut, pipe fork, Gabriel brand shock absorbers, cylinder sleeves, gaskets, camshafts, door lock and hinges and steering boxes.
HIGHLIGHTS FOR THE AUTO SECTOR The year FY11 was the year of consolidation for the whole auto and allied sector. After being terribly hit in FY09, the auto sectors both two wheelers, passenger cars and commercial vehicles experienced a rise in demand. The rise primarily came from the rural economy as the agriculturist had good incomes due to the high support prices set up by the government. Further strengthening the Agricultural sector was the surge in the global commodity prices due to increase in international demand.
The record export achieved by Pakistan and the all-time high remittances were also the demand pullers. Despite all of this the sales are still below the pre-crisis level. Industry member attribute a large amount of this shortfall to the unavailability of financing by the banks.
Overall an increase of 10 percent was seen in the passenger car segment in FY11 compared to the last year, largest increase was seen in the light commercial vehicle segment which grew by more than 18 percent in FY11.
HIGHLIGHTS FOR THE COMPANY In the start of the year Company had to face serious problems in the form of hampered supplies due to Tsunami in Japan. After that the government's decision to impose taxes on the tractor sales came into play. The decision to impose taxes and then a statement to make some exemptions gave birth to the sentiment that the taxes would be completely abolished. This ambiguity about the decision brought the tractor industry to a complete halt. Consequently affecting Agriauto, as the tractor industry is one of their clients.
The management, however, believes that an even greater threat to the Company is the power shortage that is pushing up the cost of production and hence putting upwards pressure on prices. However, the ever-increasing demand for two wheelers and three wheelers somewhat consolidated the slow down caused by the tractor industry. And in the end the Company was able to achieve a better bottom line this year.
Turnover Turnover increased from Rs 3.9 billion in FY10 to Rs 3.98 billion in FY11. The number would have been much higher if the tractor industry hadn't come to almost a complete halt. However, the turnover for the Company saw a small increase of roughly 2 percent in FY11, since the motorcycles and the passenger car sector had a good demand.
Profitability The rising production cost due to the surge in fuel prices and energy shortages pushed up the cost of sales in FY11. The Company was not able to transfer the rise in cost to its customers. Both of these affects combined together pushed down the gross profit in FY11 from 24.5 percent in FY10 to 20.3 percent in FY11.
Despite increase in the distribution and administrative expenses, the profit after tax surged by 11 percent. This is not something to cheer as the major contributor to the increase in bottom-line profitability is the other operating income; that is the income earned not from the general course of business. The other operating income head was roughly a Rs 90 million expense in FY10 and this year it stood at a positive Rs 70 billion. The earnings came from the prudent investment made by the Company. The EPS continued the upwards trend it had started in FY09 and in FY11 reached a level of Rs 15.24. An 11 percent increase over the last year.
Short- and long-term solvency The short-term liquidity position of the Company has been improving over a period of time. In FY11 the upwards trend continued, the short-term liquidity position improved as the current ratio increased for 5.95 in FY10 to 7.42 in FY11.
The same was the case for the long-term solvency. Both the debt to assets ratio and the debt to equity ratio fell in FY11. This decrease in the debt to asset ratio is due to an increase in assets. The short-term investment rose considerably in FY11 as compared to FY10.
Investments The Company made investments to upgrade its manufacturing facilities. The Company imported buffing and polishing machines from Japan. A total of Rs 44.86million was invested in FY11. The purchases also include new spot and seam welding machines. The components maker has plans to invest more in FY12. The Company has also decided to invest Rs 33 million in SAP (ERP) software. However, these costs will be implemented next year.
Outlook Company's policy to be abreast with the latest technology and its strong brand name are its biggest resources. The Company by utilising its resources to the maximum has outperformed in the past and would outperform in the future as well.
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AGRIAUTO INDUSTRIES LIMITED
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FY11 FY10 chg
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Turnover Rs mn 3,980 3,906 2%
Gross profit Rs mn 809 956 -15%
Gross margin % 20.3 24.5 -17%
Net margin % 11% 10% 10%
EPS Rs 15.24 13.69 11%
Current ratio 7.42 5.95 24%
ROE % 20% 22% -6%
ROA % 18% 18% 0%
Debt to assets % 12% 15% -20%
Debt to equity % 14% 18% -22%
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Source: company accounts
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