AMW's nine month pre-tax profit of Rs 792 million

Associated Motor Ways (AMW) recorded a 19 percent increase in its third quarter net profit to Rs.198.7 million, resulting in a 16 percent increase in its first to third quarter (for the nine months ended December 31, 2006) net profit to Rs.538.1 million, on the back of revaluing all its land and buildings which materially increased its net worth by Rs.1.6 billion.

AMW officials said that the additional capital reserves will greatly strengthen the balance sheet, improve debt equity levels and better reflect the value of the Net Assets of the company. As at 31 December 2006, the net worth of the company stands at Rs.3.8 billion.

AMW owns 217 perches of free hold land in Union Place, Colombo 2 and in August 2006 John Keells Holdings (JKH) acquired a 20 percent equity stake in AMW, which included a private placement of 1.03 million shares at Rs.380 per share.

AMW's Union Place land is adjacent to 3.07acres of freehold land owned by JKH subsidiary Whittall Boustead; the two properties are expected to be jointly utilised for construction of an up market housing and office complex. The tie up with JKH is primarily aimed at developing the underutilised land bank owned by both JKH and AMW, and is expected to yield medium term property development returns.

While AMW's net revenue increased 33 percent to Rs.3, 414.4 million in third quarter 2007 and 49 percent to Rs.9,473.6 million from first to third quarter respectively, the gross profit margins have dropped marginally from 17 percent to 15 percent for both the third quarter and year to date.

AMW posted a pre-tax profit of Rs.792 million for the nine months ended 31 December 2006 representing an increase of 23 percent compared to the corresponding period last year.

"We attribute our success to well managed marketing strategies and the excellent quality of our human resource base which is backed by the hallmark of superior trust and quality embedded in the AMW brand and the resultant customer confidence in world renowned brands," Deputy Chairman and Managing Director Deshabandu Tilak de Zoysa said.

For the nine months which ended on December 31, 2006, Group Revenue of Rs 9.5 billion indicates a 49 percent growth over the same period in the previous year, a significant achievement under a challenging business environment.During the quarter under review, development activity at AMW included the relocation of the Eicher buses and trucks showroom and all its facilities to a strategic location in Peliyagoda on the Kandy Road together with the expansion of the service facility there.

Further development involved the opening of a new Maruti/Suzuki showroom in Ratnapura to widen customer reach.

On the manufacturing side too, AMW made strides with the commissioning of a joint venture with CEAT of India to manufacture motorcycle tyres in November 2006. The next expansion of production capacity is expected to come into effect in May this year.
The Group's leasing arm AMW Capital Leasing continued to make a satisfactory trade off of acceptable quality of Assets and Profitability, while AMW Motor (Lanka) Co. Ltd is successfully diversifying its activities to replace loss of 'one-off' revenue following the tsunami.

De Zoysa believes that the distinction of having achieved a Fitch Credit Rating of 'A' would form a platform for the Company in its endeavour to raise cost effective funding to support its future projects. 'The stable credit outlook associated with the Fitch rating bodes well for sourcing funds for our development activities,' he said.

"We are bullish about our planned strategic initiatives and in particular the development of our workshop and spares facilities which will be a tremendous impetus to further enhance the quality of our service to our valuable customer base," he added.