Despite depressed market conditions, sales from special car permits given to government employees helped nearly double June quarter profits to Rs 594 million at AMW, which last month changed ownership to a Dubai-based company, the company said on Wednesdy.

But Deputy Chairman/Managing Director Tilak de Zoysa, in a report to shareholders, said that similar earnings (and profits) cannot be expected as this special facility ended in March and an increased tax in the western province on motor car sales will impact on revenue.

A majority stake in AMW (51 percent) was sold by the De Zoysa family to Dubai’s Al Futtaim Group which also purchased John Keells Holdings’ 21 percent stake in the company. Both transactions were done on July 28. AMW’s gross profit for the previous April-June 2007 quarter was Rs. 328 million, said Mr de Zoysa which he attributed “ mainly due to the additional income derived from GSS (permitting senior Government employees to import new passenger cars at reduced rates of duty)”. Group’s gross profits for the quarter also increased from the previous year’s first quarter to Rs. 669 million.

He said depressed market conditions throughout the previous financial year (2007-2008) continued into the first quarter of the current year with customers postponing investment decisions in the hope that high interest rates will fall.

“The recent fuel price hike also had a dampening effect on the market. In view of this background, the company did well to increase its turnover to Rs. 2.46 billion, in comparison to the first quarter of the previous year (Rs. 2.43 billion). Group turnover also reflected an increase over the first quarter of the previous year to Rs. 2.58 billion (First Quarter-2007/08: Rs. 2.53 billion),” he said.

AMW has been trading at an unchanged Rs 174.50 in the Colombo bourse, mostly picked up by Al Futtaim.The Dubai company has made the customary mandatory offer, as per Securities and Exchange Commission rules, to buy the balance 29 shares held by sections of the De Zoysa family and the public. The deputy chairman’s report said though the GSS facility ended on March 31, 2008, imports under letters of credit established prior to this date continue to enjoy preferential duties. Many such imports were cleared during the quarter under review and this income helped increase earnings of the quarter, Mr de Zoysa said. He said there are very few imports under the GSS scheme left to be cleared ‘and so, we cannot expect a similar increase in earnings during the rest of the year’.

He said on July 1 the Western Province Provincial Council increased the Turnover Tax on the sale of motor vehicles to five percent from the previous rate of one percent which will have an adverse effect on the market, leaving the outlook for the rest of the year less hopeful.