KARACHI: Honda Atlas Cars posted a net income of Rs1.62 billion in the second quarter ended September 31, up 10% compared with Rs1.47 billion in the same period last year, according to a company notice sent to the Pakistan Stock Exchange (PSX) on Wednesday.
“This was below expectations because despite strong volumetric growth, margins have shrunk and this is more significant,” a Topline Securities report commented.
Earnings per share (EPS) increased to Rs11.33 from an EPS of Rs10.32 in the period under review. This takes the six-month (Apr-Sep) profit to Rs3.7 billion (or an EPS of Rs25.94), up 47% compared with Rs2.52 billion (or an EPS of Rs17.67).
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The KSE-100 index closed at 40,591, up 43 points or 0.11% on Wednesday. Honda’s share closed at Rs559.54, down 3.88%.
In the second quarter (Jul-Sep) of fiscal year 2017-18, Honda’s net sales grew 48% year-on-year due to strong volumetric growth in sales volumes during the period, with Honda City (lower priced car) capturing more of the sales mix, the report added.
The company sold 2,070 BRV units in outgoing quarter while total unit sales of 12,604 were up 56% year-on-year.
Although sales were up 48%, gross profits rose by 9% only as gross margins shrunk 4.3 percentage points to 11.8% compared with 16.2% last year.
Margins decreased due to higher portion of low margin variants (BRV & City). While rising steel prices (cold-rolled coils - CRC - prices up 33% during the period) also added to costs.
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Other operating income also increased 116% year-on-year in Jul-Sep FY18 due to increased customer advances backed by healthy bookings for the City and BRV.
However, further growth in profit was hampered by imposition of super tax where effective tax rate rose to 38% compared with 36% last year.
During the first six months, net sales have grown 69% year-on-year driven by sales of 23,642 units, up 56% year-on-year. However, margins declined from 16% to 13% due higher costs and higher sales of low margin variants.
Published in The Express Tribune, November 23rd, 2017.
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