United Motors (UML) reports another profit decline, despite vehicle import boom

July 30, 2018 (LBO) - Colombo Stock Exchange (CSE) listed United Motors Lanka (UML) reported revenue and profit declines for the quarter ended June 2018. UML reported profit of just Rs94mn on revenue of Rs3.34bn. Profits were down 17% and revenue was down 14% year over year for the quarter. Profits of UML have been on the decline for the last several years, despite the vehicle import boom that has occurred due to changes to the import tax structure on vehicles.
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For the last few years, June quarter profits at UML have been as follows:

2018 - Rs94mn
2017 - Rs113mn
2016 - Rs295mn
2015 - Rs350mn

Analysts say that due to having the wrong product mix, UML is now generating returns below the cost of capital. On a huge asset base of almost Rs12bn, the company is making low single digit returns on equity. In the past UML has been one of the best dividend paying stocks in the market, but with recent results weakening, analysts say that it is likely dividend payments will not be as robust as they have been in the past.