Karachi, July 25, 2023 – In a significant financial setback, Honda Atlas Cars (Pakistan) Limited has reported a staggering 78 percent drop in net profit for the first quarter ended June 30, 2023.
The company’s profit after tax plummeted to Rs145 million, compared to Rs658 million during the same period last year. This sharp decline in earnings has also led to a notable decrease in earnings per share, from Rs4.61 to Rs1.02.
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The financial results were submitted to the Pakistan Stock Exchange (PSX), and the board of directors of the company, in a meeting held on July 25, 2023, made the decision to recommend no cash dividend, bonus shares, or right shares for the shareholders.
Experts at Arif Habib Limited, a leading financial institution, have attributed this significant dip in profit to negative margins, which experienced a steep decline of 1027 basis points on a year-on-year basis.
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During the first quarter of the fiscal year 2023 (1QME24), net sales of Honda Pakistan dropped to Rs 3,771 million, marking a notable 88 percent decrease compared to the same period in the previous year. The primary reason for this decline was a substantial drop in volumetric sales, plummeting by 94 percent year-on-year. The company also faced challenges due to import restrictions imposed by the State Bank of Pakistan (SBP), leading to delays in the import of CKD (Completely Knocked Down) units. Consequently, Honda Pakistan had to temporarily close its manufacturing plant for two months, resulting in a drastic production decline of 97 percent year-on-year. As a result, the company was only able to produce a meager output of 305 units during 1QME24.
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Gross margins during 1QME24 were recorded at a concerning -3.9 percent, in sharp contrast to 6.3 percent during the same period last year, depicting a massive decline of 1027 basis points. This steep drop was attributed to a higher fixed cost average due to the lower volumetric sales.
On a more positive note, the company’s other income experienced a substantial jump of 71 percent year-on-year during 1QME24, as the cash and short-term investments held by the company increased during the period under review.
The category of other expenses, however, portrayed a significant decline of 96 percent year-on-year. While detailed accounts were not immediately available, analysts speculate that this decline could be due to low exchange losses.
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For the quarter ended June 30, 2023, the company booked an effective taxation rate of 45.9 percent.
Honda Pakistan’s performance in the first quarter of the fiscal year 2023 reflects the challenges faced by the automotive industry in the country. Import restrictions and the consequent production delays severely impacted the company’s operations and sales, leading to a substantial decline in net profit and earnings per share.