ANL 34.00 Increased By ▲ 0.90 (2.72%)
ASC 14.90 Increased By ▲ 0.55 (3.83%)
ASL 25.10 Increased By ▲ 0.62 (2.53%)
AVN 92.20 Decreased By ▼ -0.30 (-0.32%)
BOP 9.14 Increased By ▲ 0.08 (0.88%)
BYCO 9.85 Increased By ▲ 0.15 (1.55%)
DGKC 134.70 Increased By ▲ 2.51 (1.9%)
EPCL 50.62 Increased By ▲ 0.52 (1.04%)
FCCL 24.63 Increased By ▲ 0.33 (1.36%)
FFBL 25.86 Increased By ▲ 1.46 (5.98%)
FFL 15.49 Increased By ▲ 0.47 (3.13%)
HASCOL 10.56 No Change ▼ 0.00 (0%)
HUBC 86.33 Increased By ▲ 1.23 (1.45%)
HUMNL 7.02 Increased By ▲ 0.27 (4%)
JSCL 25.65 Increased By ▲ 0.40 (1.58%)
KAPCO 41.55 Increased By ▲ 2.80 (7.23%)
KEL 4.02 Increased By ▲ 0.04 (1.01%)
LOTCHEM 14.45 Increased By ▲ 0.02 (0.14%)
MLCF 46.42 Increased By ▲ 0.54 (1.18%)
PAEL 37.25 Increased By ▲ 0.55 (1.5%)
PIBTL 11.70 Increased By ▲ 0.27 (2.36%)
POWER 10.25 Increased By ▲ 0.10 (0.99%)
PPL 90.90 Increased By ▲ 1.20 (1.34%)
PRL 26.86 Increased By ▲ 0.61 (2.32%)
PTC 8.71 Increased By ▲ 0.11 (1.28%)
SILK 1.35 No Change ▼ 0.00 (0%)
SNGP 42.71 Increased By ▲ 1.31 (3.16%)
TRG 146.10 Increased By ▲ 3.00 (2.1%)
UNITY 30.20 Increased By ▲ 0.41 (1.38%)
WTL 1.41 Decreased By ▼ -0.01 (-0.7%)
BR100 4,965 Increased By ▲ 76.98 (1.57%)
BR30 25,754 Increased By ▲ 477.72 (1.89%)
KSE100 45,837 Increased By ▲ 558.82 (1.23%)
KSE30 19,174 Increased By ▲ 275.54 (1.46%)

Despite a 51 percent drop in sales of Honda (PSX: HCAR)’s in the first half of the company’s ongoing financial year, the company’s revenues only dropped 41 percent and earnings 64 percent. Last quarter, a comparison showed that Pakistan Suzuki was already incurring a loss while Honda made a profit. In the second quarter as well, Honda has managed to keep a positive balance sheet against all odds. The most positive development is being an improvement in its margins.

Due to an increase in FED and the impact of rupee devaluation, automakers including Honda had raised prices multiple times over the past one and a half years. Since last June, the company has raised prices six times. Expectedly, that put a solid dent on demand, but it did raise gross margins for the auto giant. But demand has also suffered due to other reasons such as an increase in cost of financing (due to interest rate hikes), and overall slowdown in the economy. Recall that the company kept its plant closed for 10 days last month citing reduced demand for vehicles.

 

Half year ending Sep-19 Honda Atlas Cars (HCAR)
 (Rs mn)  2019 2018 chg
 Sales       29,526.1       49,671.6 -41%
 Cost of Sales       29,960.8       45,879.8 -35%
 Gross Profit         2,565.3         3,791.8 -32%
 Distribution cost            357.1            356.3 0%
 Administrative cost            376.1            381.8 -2%
 Finance cost            254.4                 6.4 3896%
 Other operating expenses            675.1            610.7 11%
 Other operating income            200.1            809.4 -75%
 Profit before taxation         1,102.7         3,245.4 -66%
 Tax            351.3         1,165.2 -70%
 Profit after taxation            751.4         2,080.8 -64%
 Earnings per share (Rs) 5.26 14.57 -64%
 Sales (passanger cars, LCVs, SUVs)         12,800         25,935 -51%
 GP Margin 9% 8% 14%
 NP Margin 3% 4% -39%
 Finance costs as % of revenues 0.86% 0.01%
 Indirect expenses as % of revenues 5% 3% 76%
 Source: PSX, PAMA 

On the expensive side, the company could not help with inflationary pressures that led to indirect expenses grow from 3 percent of revenues to 5 percent whereas much higher cost of borrowing also raised finance costs significantly, though they remain still less than 1 percent of revenues. Comparatively, the company paid a lower effective tax this year against the corresponding period last year, but which managed to shield the decline in profits only so much.

However, despite the poor demand and expenditure scenario, Honda is keeping firmly on ground, even if the current scenario does not allow it to turn a massive gain. Given the circumstances, this is the best the company could manage, and managing it is.