Honda Atlas Cars (Pakistan) Limited has declared net losses of Rs. 511 million for the quarter ended 30th June 2020, as compared to the profits of Rs. 241.7 million recorded in the same period of last year. This resulted in the Loss per Share (LPS) of Rs. 3.58.
The massive decline in earnings seen in the financial results below is a result of lower volumetric sales during the period, on the back of lockdown restriction imposed by the Federal and Provincial Government to contain the spread of COVID-19. The gross profits of the company came down by a whopping 96% due to PKR depreciation and higher fixed costs.
The increase in short-terms loans taken by the company during the quarter resulted in a 64% increase in finance costs. It is interesting to note that the company’s decision to substitute local currency loan with short term loan of $14 million from a related party (Asian Honda Motor Company) at 3.2% mark up, as reported by IGI Securities, failed miserably in bringing down the finance cost.
Just like Suzuki and Toyota, Honda failed to sell a single car in April and was only able to sell 263 cars in May. Business operations returned to somewhat normal in June as the company managed to sell 1,839 units. According to JS Global Capital research analyst Ahmed Lakhani:
“It was expected the company will report losses in the first quarter, but a loss of Rs3.58 has been higher than expected. We were expecting the company would make losses of Rs2.”
Overall, the fiscal year 2019-20 went quite bad for Honda in Pakistan, even worse than the other two key players in the business. In addition to observing 108 non production days, Honda Atlas suffered the worst decline in terms of sales which fell by 63% to 16,390 units compared with 44,234 units in the preceding fiscal year.
Financial Results for the quarter ended June 30, 2020
|Cost of sales||(6,457,666)||(16,529,560)||-61%|
|Distribution and marketing costs||(180,804)||(177,891)||2%|
|Other operating income||90,932||174,992||-48%|
|Other operating expenses||(125,552)||(739,808)||-83%|
|Profit/(loss) from operations||(309,110)||410,635|
|Profit/(loss) before taxation||(398,466)||356,194|
|Profit/(loss) after taxation||(511,028)||241,716|
|Earnings per share||-3.58||1.69|