Honda Pakistan’s net profit drops by a massive 43.8%

Honda Atlas Cars Pakistan (HCAR) has posted a net profit of Rs. 2.08 billion for the half-year that ended in September 2018, down by a massive 43.78% from Rs. 3.70 billion in the same period last year.

Earnings per share of the company decreased to Rs 14.57 from Rs 25.94.

A significant decline in profit growth was driven by input cost escalations, which have not been effectively passed on to the consumer, thereby resulting in gross margin pressure.

However, due to multiple price hikes and volumetric sales the company’s net sales grew to Rs 49.67 billion from Rs 43.94 billion in the half year, up by 13%. On the other hand, the price increase was not imposed on already booked orders that were to be delivered during the quarter under review.

Revenue was up 13% as compared with last year, driven by a 9.67% growth in auto sales volume during the half year. Civic/City sales volumes were up 18% from 2017, while BRV volumes declined by 28.18%.

Consequently, despite a 9.67% YOY volume growth and 13% revenue improvement, gross profit was down 33.57% YOY. The cost of sales was also up by 20%.

Even though car manufacturers have been pushing retail prices higher, they have not been able to completely off-set the impact of Rupee depreciation.

The company faced higher raw material cost due to the Rupee depreciation from December 2017 to September 2018 for both local and imported components.

Profits were also dragged down by Administration expenses which were up by 29% as compared to last year while distribution expenses grew by 4.36% during the Half year period.

Overall, operating expenses were up 19.76% during the half year driving operating profit down by 41.06% to Rs 3.25 billion as compared with Rs 5.51 billion in the same period last year.

HCAR’s script at the bourse closed at Rs 247.79, down by 5% with a turnover of 326100 shares on Monday.