Honda Atlas Cars (Pakistan) Faces 90% Decline in Annual Net Profit

Honda Atlas Cars (Pakistan) Ltd, Pakistan disclosed a significant 90% plunge in its annual net profit, predominantly due to increased expenses.

The company’s net profit for the financial year ending on March 31 stood at Rs260.141 million, a considerable drop from Rs2.509 billion recorded the year before. The earnings per share were reported to be Rs1.82, in contrast with Rs17.58 the previous year, and there was no payout for this period.

The company’s yearly revenue also hit, amounting to Rs95.087 billion, down from Rs108.047 billion in the preceding year. Interestingly, the company’s cost of sales saw a minimal decline, from Rs102.515 billion to Rs87.926 billion.

A positive note in the report was the increase in the company’s other income, which grew to Rs2.321 billion from Rs2.004 billion in the previous year. However, a significant increase in other expenses, from Rs984.045 million to Rs4.929 billion, adversely impacted the company’s profit margins.

The severe drop in profit is due to lower sales volumes and soaring finance costs, which have risen 6.5 times yearly.

The auto sector, heavily reliant on imports, has felt the pinch of the country’s economic downturn. Honda, along with other manufacturers, announced a plant shutdown. However, come May 16, it was reported that Honda Atlas Cars was planning a production restart after an extended hiatus.

Honda has initiated plans to resume production operations after perceived improvements in the supply chain’s trade finance facilities. This development comes after stringent government measures, including limitations on letters of credit (LCs) for importing completely knocked down (CKD) units and raw materials by the automotive industry. This is a reaction to the country’s dwindling foreign exchange reserves.

Discussing the ongoing efforts, Honda said, “With the company’s consistent efforts and a slight uptick in the accessibility of trade finance facilities for the supply chain, preparations are underway to recommence production in the coming weeks, with aspirations to amplify production gradually.”

Honda had originally announced a production halt from March 9. The auto industry is battling various hurdles, such as non-production days, decreased consumer affordability due to increased interest rates and car prices, devaluation of the rupee, and rising petrol prices, which have led to industry-wide layoffs.

According to statistics from the Pakistan Automotive Manufacturers Association, passenger car sales in April experienced a sharp drop of 85% to 2,844 units, compared to 18,626 units in the same month of the previous year. In the first ten months of the 2022-23 fiscal year, 88,620 units were sold, indicating a 54% slump against the 191,238 units sold during the equivalent period of the previous fiscal year.

The prevalent political instability and the government’s struggle to secure a deal with the International Monetary Fund further exacerbate the nation’s economic struggles, casting shadows over any potential uplift in car sales in the near future.