Honda Atlas Cars Pakistan Limited (HACPL), one of the leading car manufacturers in the country, reported a significant decline of 90 per cent in its annual net profit due to rising expenses, reflecting the struggling state of the auto industry and the country’s economy.
The company’s net profit for the fiscal year ending on March 31 was reported to be Rs260.141 million, a sharp decrease from Rs2.509 billion in the previous year.
Consequently, the company did not distribute any dividends for that period. Earnings per share also witnessed a decline, coming in at Rs1.82/share compared to Rs17.58/share in the previous year.
Honda Atlas Cars stated that its revenue for the year dropped to Rs95.087 billion, down from Rs108.047 billion the previous year. The cost of sales remained relatively stable at Rs87.926 billion compared to Rs102.515 billion during the same period last year. On the other hand, the company’s other income increased to Rs2.321 billion, compared to Rs2.004 billion in the previous year.
However, the company experienced a surge in other expenses, which rose to Rs4.929 billion from Rs984.045 million, adversely impacting profit margins.
Arif Habib Ltd, a brokerage firm, attributed the significant decline in profit to lower volumetric sales and increased finance costs, which rose by 6.5 times on a year-on-year basis. The auto industry, which heavily relies on imports, has been severely affected by the country’s economic conditions.
Honda was among the manufacturers that had announced plant closures. However, on May 16, it was reported that Honda Atlas Cars planned to resume production activities after a months-long halt. The decision was made following an improvement in the accessibility of trade finance facilities for the supply chain.
The government of Pakistan, facing low foreign exchange reserves, implemented stringent measures, including restrictions on letters of credit (LCs) for the import of completely knocked down (CKD) units and raw materials used by the auto industry.
According to Geo, Honda stated that with the company’s consistent efforts and the slight improvement in trade finance accessibility, they are now preparing to gradually resume production in the coming weeks.
Since March 9, the company had suspended its production activities. The auto industry has encountered significant setbacks due to non-production days, reduced consumer affordability resulting from higher interest rates and vehicle prices, currency devaluation, and escalating petrol prices. These plant shutdowns have also led to layoffs in the industry.
