Honda Atlas Cars’ profit falls 29%

Carmaker earns Rs658 million in April-June quarter

KARACHI:

Honda Atlas Cars Limited declared its results for the first quarter ended June 30, 2022, reporting a profit of Rs658.2 million, down 29% as compared to earnings of Rs928.2 million in the same period of last year.

Earnings per share (EPS) in the April-June 2022 quarter stood at Rs4.61 against EPS of Rs6.50 in the corresponding period of previous year.

Topline (sales revenue) remained flat quarter-on-quarter at Rs30.2 billion as a slight decline in volumes was offset by increase in prices, Ismail Iqbal Securities auto analyst Muqeet Naeem told The Express Tribune.

Gross margins improved to 6.3% in the April-June 2022 quarter versus 4.5% in the previous quarter, which was likely due to multiple price hikes and a higher mix of Civic in total sales.

It seems the market was expecting much worse for the company due to a volatile economic situation in the country in the wake of sharp rupee depreciation against the dollar.

“The result came in higher than our expectation where major deviation came from lower-than-expected tax expense and higher-than-expected gross margins,” said AL Habib Capital Markets’ auto analyst Asad Ali in his report.

“As per our channels check, the company will record a super tax expense in Q2 of financial year 2023.”

Revenues of the company increased by 39% year-on-year to Rs30.2 billion in the first quarter ended June 2022, he said.

Significant increase in sales was driven by volumetric sales, up 24% year-on-year, and increased car prices. Sequentially, revenues declined by 2% due to decrease in volumetric sales by 10% quarter-on-quarter.

Gross margins of the company came in at 6.3%, down one percentage point year-on-year in the first quarter owing to higher freight cost and rupee devaluation against the dollar, said Asad Ali.

Sequentially, margins improved by 1.8% due to increase in car prices and the launch of higher-priced Civic.

“Other expenses increased significantly by 293% year-on-year that reached Rs753 million, driven by exchange loss, according to our channels check,” he said.

Other income went up by 57% year-on-year to Rs527 million in the first quarter due to higher interest rates and a strong order book. Effective tax rate came in at 40% in the quarter under review as compared to 32% in the first quarter of FY22.

Aba Ali Habib Securities’ auto analyst Ali Asif said in the April-June 2022 quarter, Honda Atlas Cars’ sales grew 39% year-on-year due to higher volumetric sales and increase in car prices.

However, despite that, company profits declined by 29%, mainly due to the imposition of super tax and lower gross margins.

Published in The Express Tribune, July 27^th, 2022.

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