30th June 2011, www.lankabusinessonline.com
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.".
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.
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