Honda Atlas Cars Pakistan Ltd. (HCAR) has reported a significant drop in its profits for the second quarter of 2023, ending June 30. The company’s profit after tax plummeted by 78% year-on-year to Rs. 144.9 million, a stark contrast from the previous financial year’s Q2 profit of Rs. 658.2 million.
The primary cause of this drastic decline in profitability is attributed to a decrease in sales volume due to production constraints. HCAR faced a 45-day plant shutdown during the quarter, resulting from supply chain disruptions caused by import restrictions. Consequently, the company’s sales for April-June 2023 nosedived by a staggering 87.5% to Rs. 3.77 billion, compared to Rs. 30.24 billion recorded in the same period last year.
In terms of taxation, HCAR paid Rs. 122.7 million in taxes in Q2 2023, a significant reduction from Rs. 436 million paid in the previous year. The company’s earnings per share (EPS) also took a hit, falling to Rs. 1.02 from Rs. 4.61 in Q2 2022.
Despite these challenges, the company’s stock at the bourse was up by Rs. 1.33 or 1.10%, with a turnover of 541,615 shares on Tuesday. In a recent corporate briefing, HCAR expressed optimism about the future, stating that banks are opening Letters of Credit (LCs) for the auto industry. The company anticipates an increase in sales in the 2024 Market Year (MY 2024), provided the government does not impose further automotive import restrictions.
Looking ahead, HCAR plans to introduce hybrid electric vehicles (HEVs) in Pakistan, although the exact timeline and models have not been disclosed. In MY 2023, Honda sold 25,726 cars, a decrease from 37,613 cars sold in MY 2022. However, the company aims to improve these figures in MY 2024.
On the cost side, the company reported a cost of sales at Rs. 3.91 billion, down by 86.2% YoY compared to Rs. 28.33 billion in Q2 2022. This resulted in gross losses of Rs. 148.3 million, compared to a gross profit of Rs. 1.91 billion in the same period last year. However, other income increased by 71.4% YoY to Rs. 902.6 million. Distribution and marketing costs decreased by 42.2% to Rs. 140 million, and administrative expenses dipped by 18.2% to Rs. 271.9 million. Conversely, the financing cost jumped 120.8% YoY to Rs. 43.7 million.
