Honda Pakistan Makes More Money Despite Expensive Cars

Jawad

23 Nov 2023

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Honda Pakistan Makes More Money Despite Expensive Cars

In an unexpected turn of events, Honda Atlas Cars Limited (PSX: HCAR) has reported a substantial after-tax profit of Rs. 675 million for the quarter ending September 30, 2023 (2QMY24). This marks a significant departure from the Rs. 385 million loss reported in the same period last year, as outlined in the notification filed with the Pakistan Stock Exchange (PSX).

Positive Margin Improvement

One of the pivotal factors contributing to this impressive turnaround is the substantial improvement in margins, which increased by 750 basis points on a year-on-year (YoY) basis. Despite facing a challenging market environment, Honda Atlas Cars achieved a remarkable 127 percent rise in gross profit during the quarter, reaching Rs. 1.52 billion. This positive shift in gross margin, climbing to 10.9 percent from the 3.4 percent reported in the same quarter last year, is attributed to higher car prices and lower commodity prices, particularly in the steel sector, according to Arif Habib Limited.

Strategic Cost Management and Sales Performance

Despite a YoY decline in sales by 28.6 percent to Rs. 13.9 billion in the quarter, the company's top line for the half-year ending September 30, 2023, stood at Rs. 17.7 billion, reflecting a 64 percent decline on a YoY basis. However, the decline in sales was mitigated by effective cost-saving measures, particularly in distribution and marketing, which decreased to Rs. 212 million from Rs. 216 million in the same period last year.

Financial Dynamics

While the finance cost of the company witnessed a substantial increase of 191 percent, soaring from Rs. 41 million to Rs. 120 million during 2QMY24, the impact was effectively mitigated by a 14 percent increase in other income. Other income reached Rs. 896 million from Rs. 787 million in 2QMY23.

Resilience in the Automotive Industry

This robust financial performance positions Honda Atlas Cars Limited as a resilient player in the automotive industry. Navigating challenges through strategic pricing and effective cost management, the company has showcased its ability to not only recover from losses but thrive in a dynamic and demanding market. The positive trajectory in margins and profit growth underscores Honda Atlas Cars' adaptability and strategic prowess in a competitive landscape.

Honda Atlas Cars Honda Pakistan Honda Atlas Cars Profit Growth Honda Atlas Financial Performance Honda Atlas Margin Improvement

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