Honda Atlas posts quarterly profit of 197 million rupees

CARACHI:

Honda Atlas Cars Limited (HCAR) recorded an after-tax profit of 197 million rupees for the fourth quarter ended March 31, 2022, down 78% from 895 million rupees in the same period a year earlier.

“The result is below our expectations, mainly due to higher-than-expected distribution costs and effective tax rate,” said Muqeet Naeem, automotive sector analyst at Ismail Iqbal Securities.

Speaking to The Express Tribune, Topline Securities senior research analyst Sunny Kumar said the result came in below expectations due to lower than expected gross margins.

The main reason for the decline in gross margins is the devaluation of the rupiah in addition to the rise in steel prices, he said, adding that net sales had increased due to a rise in volumetric sales. .

“The company sold 37,603 units during the fiscal year ended March 31, 2022.” Earnings per share for the year was Rs17.58, up 40%.

Along with the result, the company also announced a cash dividend of Rs7 per share, in line with expectations, Naeem said.

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“The car company’s revenue came in at Rs 30.8 billion (in line with expectations), up 4% quarter-on-quarter, driven by the sequential increase in car prices and when delivery of the new Civic begins in March 2022.”

Gross margins came in at 4.5%, versus expectations of 5.6%, up 1.8 percentage points quarter-on-quarter as higher car prices in November 2021 slowed being reflected in the quarter under review, he said.

The distribution cost was multiplied by 2.38 to reach 613 million rupees (the highest ever), “which could be due to the cost of marketing the new Civic”, he said. The effective tax rate was 76.1% compared to 30.4% in the prior quarter.

According to the latest available data for April 2022, Pakistan’s automotive sector saw a significant drop of 18% in passenger car sales to 22,370 units.

This is the second significant decline of the year. The decline was expected due to restrictions on car financing and ever-increasing import tax rates earlier this year, he said.

The government had discouraged customers from buying cars in an attempt to avoid the depletion of foreign exchange reserves, “as the country assembles vehicles through imports”.

The State Bank of Pakistan (SBP) has reduced the duration of auto financing in line with the government’s aim to stop the rapid depletion of foreign exchange reserves.

In addition, a strong appreciation of the US dollar against the rupee made imports more expensive and encouraged automakers to raise prices. It also caused a drop in sales.

Published in The Express Tribune, May 27and2022.

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