With strong demand for both of its car variants, Honda Atlas Cars (PSX: HCAR) wrapped up its year ending March 2018 with a strong top-line growth, but which translated into a somber growth in after tax profits. In fact, with total sales growing by 43 percent during the April-March period, the bottom-line remained largely out of line. The dual effect of steel prices and currency depreciation were the culprit.
During the year, both civic and city sales grew consistently month after month given higher demand overall in the car segment, particularly in the upper-middle class section of the economy. Lower interest and easier car financing through multiple banks have also boosted this demand. Moreover, the company also introduced Honda-BR-V, a crossover subcompact 7-seater SUV best suited for families and are considered practical vehicles with the features of a car and an off-road vehicle. The variant sold more than 750 units per month during the period which speaks for its appetite.
Margins dropped to 11 percent due to the higher costs. The rupee depreciated by 9.5 percent against the dollar, by 9 percent against the Thai Baht and by 16.4 percent against Japanese Yen. The company imports its Completely Knocked Down (CKD) kits from Thailand and Japan. Meanwhile, steel prices also rose during the period by nearly 30 percent year-on-year. The company managed to keep all of its indirect costs in check—they remained 3 percent of revenues same as last year.
In March, the company did manage to increase its price tag by Rs150,000 for both civic and city which was 6 percent and 9 percent respectively but that may not have been enough to safe the margins. Fluctuations in steel prices and continued depreciation may hurt these going forward.
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