Honda Atlas Cars Announced Decrease in Profits Q1 2020

[PSX] Honda Atlas Cars Announced Decrease in Profits Q1 2020

Honda Atlas Cars announced its financial results for the year ending 31 March 2020.

The company reported a profit of Rs. 681.75 million, down by a massive 82.31 percent compared with a profit of Rs. 3.85 billion recorded last year in the same period.

The automaker has, for the second time, posted a loss during the fourth quarter. It had announced a loss in the outgoing quarter of Rs. 28 million. It had also recorded a loss during the third quarter of the year. Accompanying the result was a cash dividend of Rs. 1.0 per share.

Sales were down 42.14 percent over the year to Rs. 55.04 billion compared to Rs. 95.12 billion posted last year.

The main reasons behind the drop in profits were the decline in sales as volumes decreased by 54 percent due to higher prices, a 64.06-fold increase in finance costs, low gross margins, low demand in the country, and due to the parity of the Rupee / Dollar. It is worth mentioning that in the course of the year Honda had multiple times increased vehicle prices.

Disruption in the supply chain owing to Covid-19 may also have led to lower margins.

One of the worst slowdowns in decades is facing the automotive sector in the region, primarily due to contracting demand due to COVID-19 and poor customer feelings.

During the year, however, sales costs were recorded at Rs. 50.95 billion, down 36.30 percent from Rs. 87.82 billion due to low demand, which took gross profits to Rs. 4.09 billion against Rs. 7.30 billion.

UNITS SOLD MARCH 20 V MARCH 19

Models Units Sold 2019-20 Units Sold In 2018-19 Difference
Civic and City 18,906 42,945   -56%
Honda BR-V 3,435 5,424   -36.70%
Total 22,341 48,369    -54%

The company’s other income also fell by 51.30 percent in the year to Rs. 638 million compared to Rs. 1.31 billion in the same period last year due to a drop in new car bookings and short-term investments to manage the company’s liquidity position.

Financing costs increase significantly 64.06 fold to Rs 727.44 million compared to Rs 11.18 million. The unprecedented increase in the cost of finance was due to increased borrowing to meet higher demands for working capital at high-interest rates throughout the year. The business resorted to bank funding and the financial fees increased as a result.

Distribution and marketing expenses were down Rs. 667.90 million over the period under review compared to Rs. 931.78 million. Administrative expenses were also reduced to Rs. 738 million compared to Rs. 800 million, with other operating expenses dropping by 19 percent to Rs. 1.04 billion compared to Rs. 1.28 billion.

The company’s earnings per share went down from Rs. 26.97 to just Rs. 4.77.

HCAR ‘s share on the stock exchange, however, closed at Rs. 186.91, up 4.48 percent or Rs. 8.02 on Tuesday with a turnover of 0.46 million shares due to the dividend announcements by the company.

Muhammad Salman Siddique
Researcher and Content Writer at e-Syndicate Network. A constant learner. Learning and growing every day. Salman has over 5 years of experience in the fields of Digital Marketing, Content Writing, Brand and Business Development.