Honda Atlas Cars Records Sharp Decline in Profits Amidst Production Challenges

Honda Atlas Extends Production Shutdown To April End Amidst Pakistan's Economic Crisis

Honda Atlas Cars Limited (HCAR), experienced a significant contraction in its profits for the financial year ending March 31, 2023. As per the official communication to the Pakistan Stock Exchange (PSX), the company’s after-tax profits slumped to Rs. 260.14 million, marking a drastic 89.6% decline from Rs. 2.5 billion in the preceding financial year. 

The automobile manufacturer refrained from declaring a cash dividend for the fiscal year. 

In the January-March quarter (Q4FY23), Honda reported a loss of Rs. 5.8 per share, a notable reversal from the earnings of Rs. 5.7 per share in the previous quarter. Ismail Iqbal Securities attributed the downward shift largely to escalated operating costs, potentially triggered by substantial foreign exchange losses. 

Annual sales for the Honda Atlas company dipped 12%, shrinking to Rs. 95.08 billion from Rs. 108.04 billion noted in the corresponding period of the previous year. Despite several price adjustments, the company’s fourth quarter topline stood at Rs. 22.3 billion, marking a 3% sequential decline, primarily due to a 6% drop in sales volumes. 

However, the company’s gross profit showed an upward trend, climbing 29.4% to Rs. 7.16 billion, compared to Rs. 5.53 billion in the prior year. The gross margin at 12.5% was the highest since Q1FY18 when it was at 14.2%. 

The fiscal year saw a reduction in distribution and marketing costs to Rs. 902.37 million compared to Rs. 1.14 billion in the previous year. 

Simultaneously, the company’s other income saw an increment of 15.8%, rising to Rs. 2.32 billion, and it rose by 110% quarter-over-quarter to Rs. 683 million in Q4FY23, largely due to attractive deposit rates. However, the company’s finance cost skyrocketed by an extraordinary 549.8% from Rs. 53.26 million to Rs. 346.14 million during the year. 

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The earnings per share (EPS) for FY23 were reported at Rs. 1.83, a significant reduction from Rs. 17.58 in the previous year. 

On Friday, HCAR’s stock at the exchange concluded at Rs. 97.5, shedding 3.74% or Rs. 3.79, with a turnover of 128,577 shares. 

Having faced a challenging year marked by production and sales disruptions, HCAR is experiencing some tough times. Supply chain issues stemming from import restrictions have caused two months of dismal output. Last month, the company, one of Pakistan’s leading car manufacturers by production and sales volume, managed to sell a meager 207 cars. Disturbingly, their flagship model, the Honda Civic, recorded zero sales. 

A recent update suggests that Honda Atlas is set to recommence production soon, thanks to a “slight improvement in the accessibility of trade financing facilities”. However, the specific date for the production restart remains undisclosed. 

In light of the ongoing challenges in the automobile market, Honda’s sales are anticipated to maintain a tepid trend for the foreseeable future. 

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