Honda Atlas goes from loss to profit

Rebound witnessed on back of rise in sales, other income

KARACHI:

Honda Atlas Cars Limited (HCAR) posted an after-tax profit of Rs928 million in the quarter ended June 30, 2021 compared to a loss of Rs511 million in the same quarter of last year. The rebound came primarily due to an exorbitant increase in sales.

According to a notice sent by the auto company to the Pakistan Stock Exchange on Thursday, earnings per share (EPS) of the enterprise came in at Rs6.5 during the April-June 2021 quarter compared to loss per share of Rs3.58 in the same period of last year.

During the quarter, sales of the company skyrocketed 234.2% to Rs21.8 billion. It had reported sales of Rs6.5 billion in the same quarter of last year.

“This massive upsurge in earnings was experienced on the back of volumetric growth in sales, of 226%, to 7,593 units compared to 2,329 units in the same quarter of last year,” Arif Habib Limited analyst Arsalan Hanif said in comments to The Express Tribune.

“The revival of economic activity, after the Covid-induced lockdown was lifted, played a significant role.”

Lower auto financing rates coupled with improvement in the purchasing power parity also boosted sales, he said.

A significant growth in gross margins was witnessed, which was attributable to the appreciation of the rupee against regional currencies along with economies of scale.

Topline Securities analyst Umair Naseer said that Honda’s revenue increased from Rs6.5 billion in the first quarter of marketing year 2021 to Rs21.8 billion in the first quarter of marketing year 2022, which was fuelled by a recovery in auto sales after the easing of Covid-related lockdowns.

Honda’s earnings were up 4% quarter-on-quarter and they remained higher-than-industry expectations.

“However, revenues of the company were down 4% quarter-on-quarter in the first quarter - April to June - of marketing year 2021-22,” he said. “This was in line with our estimates.”

On the flip side, the gross margins of the car manufacturer amounted to 7.3% during the quarter under review, which were much higher than the 5.2% recorded in marketing year 2021 and the research house’s estimate of 6.4%, he said.

He was of the view that an improved product mix, lower freight cost and appreciation of the rupee against the US dollar led to improvement in the gross margins.

Distribution and marketing expenses of the company fell from Rs180.8 million during April-June 2020 to Rs132.5 million in April-June 2021.

Naseer said that the drop in distribution and marketing expenses contributed to the bottom line growth of the company.

“Other income improved from Rs91 million in the first quarter of marketing year 2021 to Rs335 million in the first quarter of marketing year 2022,” he said.

Published in The Express Tribune, July 30^th, 2021.

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