Honda Atlas Cars (Pakistan) Ltd Faces Sharp Profit Decline Amidst Economic Challenges

Honda Atlas Cars (Pakistan) Ltd, one of Pakistan's leading auto manufacturers, has reported a substantial decline in its full-year net profit due to rising expenses and a challenging economic environment. The company's financial performance has been adversely affected by lower sales volumes, increased finance costs, and various economic factors impacting the auto industry in Pakistan.

Financial Performance:

For the fiscal year ending on March 31, Honda Atlas Cars recorded a net profit of Rs260.141 million, representing a significant decrease of 90% compared to the previous year's figure of Rs2.509 billion. This decline in profits has led the company to skip any payout for the said period. Earnings per share also experienced a significant drop, with Rs1.82/share in the current year compared to Rs17.58/share in the previous year. The company's revenue for the year declined to Rs95.087 billion from Rs108.047 billion, while the cost of sales remained relatively stable at Rs87.926 billion.

Factors Impacting Profitability:

The major contributors to Honda Atlas Cars' decline in profits were lower volumetric sales and increased finance costs. The company witnessed a sharp decline in sales volumes, resulting in reduced revenue. Furthermore, finance costs rose by 6.5 times on a year-on-year basis, further impacting profitability. The auto industry in Pakistan, which heavily relies on imports, has been severely affected by the country's economic conditions, adding to the challenges faced by Honda Atlas Cars.

Plant Closure and Resumption of Production:

Honda Atlas Cars had previously announced the closure of its plant due to the economic difficulties prevailing in the country. However, in May, the company initiated plans to resume production activities. The decision came after improvements in the accessibility of trade finance facilities for the supply chain. Honda Atlas Cars aims to gradually increase production in the coming weeks, hoping for a gradual recovery in the market.

Challenges Faced by the Auto Industry:

The auto industry in Pakistan has encountered multiple setbacks, including non-production days, reduced consumer affordability resulting from higher interest rates and vehicle prices, rupee devaluation, and escalating petrol prices. Plant shutdowns have led to layoffs across the industry. Recent data from the Pakistan Automotive Manufacturers Association highlights a significant decline in passenger car sales, with April sales plummeting by 85% compared to the same period last year.

Economic Challenges and Uncertain Future:

Pakistan's economy is currently facing severe political turmoil, and the government has been struggling to secure a deal with the International Monetary Fund (IMF), despite implementing stringent measures to gain the lender's support. Given the prevailing economic conditions, it is challenging to predict an immediate improvement in car sales. The uncertain future further adds to the difficulties faced by Honda Atlas Cars and the broader auto industry in Pakistan.

Honda Atlas Cars (Pakistan) Ltd has experienced a sharp decline in net profit due to increased expenses and challenging economic conditions. Lower sales volumes and rising finance costs have significantly impacted the company's profitability. However, with the resumption of production activities and a gradual recovery in the market, Honda Atlas Cars aims to navigate these difficulties. Nonetheless, the overall auto industry in Pakistan continues to face significant challenges, and a rapid improvement in car sales remains uncertain.