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Colonial’s profit drops 35.9%

Shake-up of clean car laws has “significant” impact on company’s half-year figures.
Posted on 22 February, 2024
Colonial’s profit drops 35.9%

Colonial Motor Company has announced a trading profit after tax of $9,1 million for the six months to the end of December, which was down by 35.9 per cent from $14.2m in the same period of the prior year.

Ash Waugh, chairman, notes the figures for the first half of the 2024 financial year come after the comparative period’s “very strong result”.

He confirms that, as reported in the company’s guidance update on January 18, the prior government’s clean car legislation had significant distorting impacts on the new vehicle market. 

“The current government’s telegraphed and welcome decision to cease the clean care discount programme led to inevitable negative market impacts in November and December 2023,” he explains. 

“It logically suppressed immediate-term demand for non-electric vehicles, pushing registration and sales into January 2024. 

“This suppressed demand, a high interest rate environment and associated inventory holding costs also influenced the half-year results.”

Waugh, pictured, notes there were 140,850 new light vehicle registrations for the 2023 calendar year, down more than 15 per cent from 2022 as the latter months of the year were “heavily impacted by the issues already mentioned”. 

Conversely, the heavy truck market was up seven per cent on the prior year.

Besides challenging trading conditions, the company also incurred start-up costs to launch its new venture into JAC light trucks. It explains that establishing a new brand in New Zealand will take time to mature and this investment is not expected to make a positive contribution in 2024.

Property plans

Colonial reports the rebuild of Agricentre’s tractor dealership in Gore has been completed and a property has been acquired in Nelson this year, which provides a foothold and opens options for the future in that key market. 

“In this somewhat volatile property market environment, we have adopted a more conservative programme for dealership development and refurbishment for the remainder of 2024,” Waugh adds.

Looking ahead, he notes that although the company’s trading conditions stabilised in January it remains cautious about the rest of the financial year.

“The same fundamental issues of economic uncertainty, a relatively low New Zealand dollar, cost-of-living factors and stubbornly high interest rates, along with concerning geo-political tensions, will continue to influence consumer confidence,” he continues. 

“These will impact to an unknown degree on new and used vehicle enquiry in the second half of the financial year. 

“As inventory levels ease from their current peak, but remain elevated in the short term, high interest costs will continue to impact earnings.”

Colonial’s board has declared an unchanged fully imputed interim dividend of 15 cents per share.