Honda Atlas Cars (HCAR) has reported a 50% drop in profit for the quarter ended June 2018 with earnings per share of Rs. 7.4 compared to Rs. 14.6 in the same quarter of the previous year.
The company’s profit in the three months ended June 30, 2018, amounted to Rs 1.050 billion as compared with Rs 2.086 billion of the same period last year, the company said in a statement to Pakistan Stock Exchange.
The famous and key brands of the company, Honda Civic, and Honda City registered the growth of 21 percent YoY.
The crossover SUV, BR-V shows a decline of 19 percent YoY.
Honda BR-V emerged as a not so expensive SUV from the company. It tried to compete with the likes of Toyota Fortuner, Imported Honda Vezel, and others but failed to attract a majority of the serious buyers since the car spoils the experience of SUV lovers in many ways. A majority of them calls it underpowered.
The company recorded 13 percent rise in net sales and volumes YoY that was against the forecasts owing to three times price hike since December 2017.
Cost of sales outpaced net sales growth, rising by 20 percent YoY in April-June 2018. Resultantly, gross margins contracted by 5.2 percentage points YoY to 9.0 percent in the said period.
According to The News, Topline Securities Analyst, Syed Daniyal Adil attributes deterioration in gross margins to an increase in raw material cost and approximately 15 percent depreciation of Pakistani rupee from December 2017 to June 2018.
“We flag further unfavorable movement in the exchange rate and commodity prices; regulatory changes; increased competition from existing and new players and disruptions in operations of the Honda Atlas, as key risks for the company,” Syed Daniyal Adil said.
Earnings were also dragged down by 28 percent YoY and 22 percent YoY increase in distribution and administrative expenses respectively, which results from an increase in fixed overhead costs in line with sales. Simultaneously, other operating costs were up 37 percent YoY which is primarily due to exchange losses, the analyst claimed.