Rising Costs Shrink Honda Atlas Q3 Profit to Rs257 Million

Honda Atlas Cars (Pakistan) Limited (HCAR) reported a nearly 62% decrease in profit-after-tax (PAT) for the quarter ending September 30th, 2024, compared to the same period last year.

The company’s earnings per share (EPS) decreased to Rs1.8, as its profit-after-tax decreased to Rs257.74 million. This is a significant decrease from the Rs675.34 million profit (EPS: Rs4.73) that was recorded during the same period last year (SPLY).

The company’s revenues increased by 18.92 percent, reaching Rs16.6 billion, despite the decline in profits. However, the paradox is attributable to the increasing costs.

For the quarter, gross profit decreased by 20% to Rs1.22 billion due to the cost of sales exceeding revenue growth. As a result, gross margins experienced a decline, falling from 10.9 percent in SPLY to 7.4 percent.

The situation was further complicated by a significant decrease in the company’s other income, which plummeted by 90.5 percent to Rs84.85 million, a precipitous decrease from the Rs896.57 million reported in the same quarter last year. The overall profitability was significantly impacted by this decline in other income.

Honda experienced a varied set of expenses, as administration expenses increased by 14.5% year over year, totaling Rs437.92 million.

Conversely, distribution and selling expenses experienced a 14.6% decrease to Rs181.17 million. Furthermore, other operating expenses experienced a more substantial decrease of 67.1 percent, resulting in a total of Rs66.97 million.

However, finance expenses posed an additional obstacle, increasing by 60.9 percent to Rs193.31 million from Rs120.17 million in the SPLY. This was primarily due to the ongoing increase in interest rates, which further exacerbated the company’s financial situation.

On the brighter side, the organization experienced substantial reductions in its tax obligations. Honda Atlas paid Rs168.71 million in taxes during the quarter, a significant decrease of 79.7 percent from the Rs829.64 million it paid during the same period last year.

HCAR began its commercial operations in 1994 after being established as a public limited company in Pakistan in 1992. The corporation was established due to a joint venture between Atlas Group of Companies, Pakistan, and Honda Motor Co., Ltd., Japan.