June 30, 2011 (LBO) - Sri Lanka's motor sector companies' profitability has fallen after the reversal of some import tax cuts that caused a profit surge, although vehicle demand remains strong with rising incomes and economic growth, a report said.
Motor sector companies reported the highest growth in net profit for the last couple of quarters after the government slashed import duties last year, Lanka Securities said in a report on corporate earnings for the January - March 2011 quarter.
. Net profit growth in the sector was 132.5 percent in the quarter from a year ago owing to the tax cuts but profits were down compared with the previous quarter.
. "The sector demonstrated a monstrous growth in profitability - by 132.5 percent year-on-year to 1,119.8 million rupees - which can be attributable to the overwhelming demand for vehicles hyped by the reduction in vehicle imports duties," it said.
. Nevertheless, the sector saw a 13.4 percent quarter-on-quarter drop in earnings - a sign of the fading effects of the tax revision, the report said, referring to the re-imposition of some import duties by the government.
. "Hence, we are not anticipating abnormal profit growth in the forthcoming periods that was seen in the last quarter," Lanka Securities said.
. "But with the prevailing economic conditions in the country and growing demand along with per capita income we anticipate sustainable growth in the companies in the sector."
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Sri Lanka's economic growth has begun to accelerate with the end of its 30-year ethnic war in 2009 with vehicle imports remaining high.
source - www.lbo.lk
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