KARACHI, May 27, 2023: With the economy in bad shape, Honda Atlas Cars (Pakistan) Ltd, one of the top auto manufacturers in the country, reported on Friday a 90% decrease in its full-year net profit due to an increase in expenses, reported The News.
In a stock filing, the company reported a net profit of Rs260.141 million for the year that ended March 31, down from Rs2.509 billion the previous year. The company skipped any payout for the said period. Earnings per share came in at Rs1.82/share, compared with Rs17.58/share last year.
The company said its revenue for the year dropped to Rs95.087 billion, compared with Rs108.047 billion a year earlier. Its cost of sales remained at 87.926 billion from Rs102.515 billion during the same period last year.
Honda said its other income for the period rose to Rs2.321 billion, compared with Rs2.004 billion the previous year.
Other expenses rose to Rs4.929 billion from Rs984.045 million, which affected the profit margins.
Brokerage Arif Habib Ltd said the significant decline in profit was attributed to lower volumetric sales and higher finance costs, which were recorded up by 6.5x on a year-on-year basis.
The auto industry, which is import reliant, has been facing the brunt of the economic conditions of the country.
Honda was among one of the manufacturers that had also announced plant closure.
On May 16, it was reported that after a months-long production break, Honda Atlas Cars has revealed that the automaker was working to resume production activities.
The automaker has initiated work on a resumption plan after an improvement was witnessed in the accessibility of trade finance facilities for the supply chain.
With the low foreign exchange reserves of Pakistan, the government resorted to some stringent measures, including restrictions on letters of credit (LCs) for the import of CKD (completely knocked down) and raw materials imported by the auto industry.
Honda said: “With the consistent efforts of the company and slight improvement in accessibility of trade finance facilities for the supply chain, the company is now preparing to resume its production in the weeks ahead, with the hope to increase the same gradually”.
The company had announced the suspension of production activities from March 9.
The auto industry is facing a huge setback amid non-production days, reduced consumer affordability on the back of higher interest rates and vehicle prices, rupee devaluation, and escalating petrol prices. The plant shutdowns have also resulted in layoffs in the industry.
According to the latest data released by Pakistan Automotive Manufacturers Association, passenger car sales fell by 85% to 2,844 units in April, against 18,626 units recorded in the same month of last year.
In the first ten months of the fiscal year 2022-23, a total of 88,620 units have been sold, down 54% against 191.238 units sold during the same period in the same fiscal year.
Honda Atlas Cars recorded a decline of 75% month-on-month to 207 units in April, led by a decline in sales of City and Civic by 74%. Similarly, Pak Suzuki also posted a decline of 74% month-on-month to 1,474 units.
The country’s economy is reeling amid severe political turmoil, while the government has been struggling to win an International Monetary Fund deal despite taking some harsh measures in recent months to amuse the lender of the last resort.
With all this, it’s hard to predict an improvement in car sales in the foreseeable future.