Honda switches from loss to profit

Reports earnings of Rs751.8m in quarter ended Dec 31, 2020

Honda Atlas Cars Pakistan reported a profit of Rs751.8 million for the third quarter ended December 31, 2020 against a loss of Rs41.3 million in the same quarter of previous fiscal year.

The carmaker reported profit in the wake of restoration of vehicle demand coupled with attractive auto financing rates. According to a notice sent to the Pakistan Stock Exchange on Wednesday, the auto assembler’s earnings per share came in at Rs5.26 during the Oct-Dec 2020 quarter against loss per share of Rs0.29 in the same period of last year.

Taurus Securities’ analyst Mustajab Ali Kazmi said Honda Atlas recorded a 14% quarter-on-quarter growth in profit primarily due to 5.2 times increase in other income along with lower distribution and administration cost.

In the first quarter (April-June), the company reported a loss owing to Covid-induced lockdowns but it managed to bounce back in the second and third quarters, he added.

Sales of the company during the Oct-Dec quarter amounted to Rs17.6 billion, which was 78.9% higher than Rs9.9 billion in the same period of 2019.

“The topline, however, fell 14% on a quarter-on-quarter basis mainly because Honda sold 6,231 units in the period under review against 7,435 units during the July-September quarter of 2020,” he said. According to the analyst, entry of new players and new car models in the market impacted Honda sales. Nevertheless, sales volume grew 69% year-on-year and translated into a 79% hike in sales revenue, he said.

Overall, the company’s sales volume increased during the Oct-Dec 2020 quarter as opposed to the same quarter of previous fiscal year, confirmed Topline Securities’ analyst Fawad Basir while talking to The Express Tribune.

Gross profit margin of the company remained intact due to seasonality impact, said Basir. He pointed out that in December every year, customers deposited advance payments for car models expected to be received next year, which was reflected in other income of the company.

The company also saved a hefty amount in distribution and marketing costs, which fell 63% during the quarter to Rs89.9 million. The company had paid Rs241.4 million under the same head during the same quarter of previous fiscal year.

“Generally, automobile sales record a strong momentum driven by higher demand amid low interest rates and economic recovery,” said Basir.

He pointed out that the entire industry faced severe supply issues during the quarter under review arising from congestion of ports due to Covid-19 in the Far East region. The company recorded a profit of Rs897.7 million for the nine-month period ended December 31, 2020, which was 26% higher compared to the same period of previous year, said Kazmi.

Published in The Express Tribune, January 28^th, 2021.

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