Earnings of Honda Atlas Cars (Pakistan) jumped 28.9% to Rs656.9 million in the quarter ended September 30, 2020 on the back of a spike in sales coupled with a sharply lower finance cost.
According to a notice sent by the company to the Pakistan Stock Exchange on Wednesday, the carmaker had reported a profit of Rs509.7 million in the same quarter of last year. Accordingly, earnings per share of the company for the Jul-Sept 2020 quarter came in at Rs4.6 compared to Rs3.57 in the same quarter of previous year.
“The company recovered from the loss of Rs511 million in first quarter of FY21 to a profit of Rs657 million in the second quarter,” said Topline Securities analyst Fawad Basir. “The result is above industry’s expectations mainly due to higher-than-expected gross margins and lower finance cost.”
Net sales of the company soared 75.4% to Rs20.4 billion in the quarter under review as opposed to Rs11.6 billion in the corresponding quarter of previous year. According to the analyst, the significant recovery in earnings came mainly on the back of increase in unit sales by 67% year-on-year and 219% quarter-on-quarter in the second quarter of FY21.
The increase in sales was the result of easing Covid-related lockdown and low interest rates, the analyst pointed out. During the quarter under review, other income of the company amounted to Rs66.3 million, up 163.7% compared to Rs25.1 million in the same quarter of last year.
Distribution and marketing cost dropped 15% to Rs150.7 million during the period under review. The cost had been Rs179.2 million in the corresponding quarter of previous year. Finance cost plunged 91.2% to Rs17.5 million against Rs200 million in the same quarter of last year.
JS Global analyst Ahmed Lakhani said, “Additionally, finance cost dropped amid a significantly deleveraged balance sheet in the latest quarter,” he added.
Published in The Express Tribune, November 19th, 2020.
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