Honda’s losses decrease 35% during April-June

Gross margin has turned positive but bottom-line still in the red

Honda Atlas Cars net losses decreased 35 per cent to Rs100 million for the quarter ended June 30 against Rs155 million in the same period last year.

Gross margin of the company has turned positive but net profit still lies in the red, said Topline Securities analyst Furqan Punjani.

The company needs to increase its sales in order to post profits, said Punjani, adding that it is unlikely that Honda will be able to increase sales of its cars in the near future.

Honda sold only 14,120 units in fiscal year 2010 while Pak Suzuki and Indus Motor sold 73,993 and 50,823 units respectively, according to Pakistan Automotive Manufacturers Association (PAMA).

Net sales of Honda Atlas Cars (Pakistan) Limited increased 74 per cent to Rs5.6 billion during April to June against Rs3.2 billion last year. Losses per share decreased Rs0.38 to Rs0.71.

Honda has been in losses for more than six quarters now as its fixed cost is really high, said Punjani. Other operating expenses surged more than seven times to Rs56.7 million in the period under review.

Car sales have jumped 50 per cent in 2009-10 on the back of gradual economic recovery, improving auto financing schemes and strong demand from rural areas.

Honda Atlas Cars Pakistan Limited is a joint venture between Honda Motor Company Limited Japan and the Atlas Group of Companies, Pakistan.

Published in The Express Tribune, July 27^th, 2010.