Honda Pakistan Suffers a Major Profit Loss Amid Car Sales Decline

• Honda Atlas Cars profits in Pakistan plunged by 82% due to a car sales slump.
• Sales dropped 46% in one quarter and 59% over nine months.
• Import restrictions and production issues also hurt earnings.

According to the notification submitted to the Pakistan Stock Exchange (PSX), Honda Atlas Cars Limited (HCAR) recorded a profit after tax of Rs. 143.2 million in the third quarter ending on December 31, 2023. This figure reflects an 82.3% year-on-year decline from the profit of Rs. 810.8 million reported during the same period last year (SPLY).

Arif Habib Limited attributes the decline in earnings to a decrease in the topline, driven by a 57% year-on-year reduction in volumetric sales.

Honda Atlas Cars did not declare any dividend payouts for its shareholders during this period. For the 9 months from April to December (9MMY24), the company reported earnings of Rs. 6.75 per share, compared to earnings of Rs. 7.6 per share in the same period last year (9MMY23).

The company's quarterly sales dropped by 46% to Rs. 12.4 billion from Rs. 22.9 billion in the same period last year. For the nine months ending in December 2023 (9MMY24), the company's total revenue reached Rs. 30.1 billion, reflecting a 59% year-on-year decline. Lower volumetric sales and the influence of import restrictions imposed by the SBP are the main factors behind this downturn. Additionally, HCAR had 17 non-production days during the third quarter of fiscal year 2023–24.

In Q3, the company disclosed a gross profit of Rs. 1 billion, marking a 43% decrease from the Rs. 1.79 billion reported in the corresponding period the previous year. The gross margin for Q3 stood at 8.25%, contributing to a 9-month ratio of 8 percent.

During the third quarter of the fiscal year 2023–24 (3QMY24), distribution and marketing costs decreased to Rs. 182.6 million, down from Rs. 218.5 million.

Concurrently, the company's other income saw a decrease of 11.2%, falling to Rs. 288 million from Rs. 321 million in Q3. This decline is attributed to the reduction in cash and cash balances. However, over the nine months ending in December 2023 (9MMY24), other income witnessed a significant 27% year-on-year surge, reaching Rs. 2 billion.

The company's finance costs experienced a sharp increase of 40%, rising from Rs. 318 million to Rs. 443 million in the third quarter of the fiscal year 2023–24 (3QMY24). For the nine months ending in December 2023 (9MMY24), the finance cost surged by 60% year-on-year, reaching Rs. 607 million.

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In the third quarter of the fiscal year 2023–24 (3QMY24), the company disclosed earnings per share (EPS) of Rs. 1, showing a notable decrease from the EPS of Rs. 5.68 reported in the same period last year.