UNITED MOTORS’ turnover grows by 28.4 % but PAT suffers due to high interest rates and increasing import levies.

The company’s chairman Mr.R.M.S.Fernando, in his interim report to shareholders states that the automobile market continued to face challenges due to the escalating cost of imports resulting from the depreciation of the Rupee, high government fiscal levies and rising interest rates. Mitsubishi vehicle imports, he says, were particularly affected in the first half of the financial year, by the Japanese Yen appreciating against the Rupee by approximately 6 %. The high import taxes and other government levies on motor vehicles inflated inventory values resulting in increased borrowings. From April to September 2007, interest rates had risen by around 25%, fuelling an escalation in the company’s borrowing costs.
 
Notwithstanding these constraints United Motors Lanka PLC (UML) had achieved a turnover growth of  28.4% over the corresponding period of last year. The Mitsubishi Canter Truck in particular, gained in popularity recording a volume increase of nearly 50% from the corresponding period of the last financial year. After sales services also improved and made a useful contribution to the company’s profitability. Despite the country’s inflation rate being over 17 %, the company had carefully managed its controllable operating expenditure, thereby reducing the impact of high inflation.

United Motors was first incorporated in 1945 as a private limited liability company. It was vested with the government on 8th March 1972 and carried on operations as Government Owned Business Undertaking (GOBU) of United Motors Ltd. In 1985 the company entered into a distributor agreement with Mitsubishi Motors Corporation, Japan and has since been the sole distributor for brand new Mitsubishi vehicles in Sri Lanka. In 1989 the company was selected as the first government venture for “Peoplelisation” with the intention of broadening the ownership of the company amongst the public. Accordingly in May 1989 the company was renamed United Motors Lanka Ltd. and incorporated as a public limited liability company. After May 2007, the company was re registered under the new Companies Act, as United Motors Lanka PLC.  Since 1989 and particularly over the last 3 years, the company has achieved remarkable results and it is today one of the leading Blue Chip companies in Sri Lanka.

The Chairman, in his report, states that in the first half of 2007/08 UML earned a Profit After Tax (PAT) of Rs. 134.2 million which was 17.8 % below the first half of last year, the drop being mainly due to the issues facing the automobile market. The consolidated PAT for the Group of  Rs. 95.6  Million also reflected a decline of  52 % over last year due to reduced profits in UML and losses incurred by some of the subsidiary companies.
However the company has succeeded in securing a fair share of orders from senior government officials who have been granted vehicle permits by the government. These orders are expected to boost profits during the second half of this financial year.  Mr. Fernando has however raised concerns over the longer term implications of  rising oil prices, its effect on inflation and increases in  fiscal levies being imposed on vehicle imports from time to time.

United Motors is proud of its track record of good governance practices, having conducted its affairs in keeping with the Code of Best Practice recommended by the Institute of Chartered Accountants of Sri Lanka (ICASL) and the guidelines for Public Listed Companies laid down by the Securities and Exchange Commission (SEC).
Since 1992 United Motors PLC has regularly won awards at the annual competition for the Best Corporate  Report and Accounts conducted by the ICASL,  being sector winner on most occasions. In the most recent awards presentation, United Motors PLC won a   
Gold Award, having been adjudged winner of the Motor Companies Sector, for its Annual Report of 2006/07.