With the economy in bad form, Honda Atlas Cars (Pakistan) Ltd, one of the country’s top automakers, announced a 90% fall in full-year net profit due to an increase in expenses Friday.
The company declared a net profit of Rs260.141 million for the fiscal year ended March 31, down from Rs2.509 billion the previous year in a stock filing. The company did not make any payments during the specified time period. Earnings per share were Rs1.82/share, down from Rs17.58/share last year.
The company’s sales for the year fell to Rs95.087 billion, down from Rs108.047 billion the previous year. Its cost of sales remained unchanged at Rs87.926 billion, compared to Rs102.515 billion in the same period the previous year.
Other expenses increased to Rs4.929 billion from Rs984.045 million, reducing profit margins.
According to broker Arif Habib Ltd, the huge drop in profit was related to decreased volumetric sales and higher borrowing expenses, which increased by 6.5x year on year.
The auto industry, which is heavily reliant on imports, has borne the brunt of the country’s economic woes.
Honda was one of the manufacturers that announced facility closures.
On May 16, it was claimed that Honda Atlas Cars had indicated that the company was preparing to resume production activities after a months-long hiatus.
Following an improvement in the availability of trade finance facilities for the supply chain, the automaker has begun work on a resumption plan.
Due to Pakistan’s low foreign exchange reserves, the government imposed tough regulations, such as limits on letters of credit (LCs) for the import of CKD (totally knocked down) vehicles and raw materials imported by the auto industry.
“With the company’s consistent efforts and a slight improvement in the accessibility of trade finance facilities for the supply chain, the company is now preparing to resume production in the weeks ahead, with the hope of gradually increasing the same,” Honda stated.
The company had declared that production would be halted beginning March 9.
The car industry is suffering from non-production days, reduced consumer affordability as a result of higher interest rates and vehicle prices, rupee depreciation, and rising petrol prices. Plant closures have also resulted in industry layoffs.
According to the most recent figures from the Pakistan Automotive Manufacturers Association, passenger car sales decreased by 85% in April to 2,844 units, compared to 18,626 units in the same month the previous year.
In the first ten months of the fiscal year 2022-23, a total of 88,620 units were sold, a 54% decrease from the 191.238 units sold during the same period the previous fiscal year.
The country’s economy is in ruins amid significant political uncertainty, and the administration has been unable to get an IMF accord despite taking some hard measures in recent months to appease the lender of last resort.
With all of this, it’s difficult to forecast an increase in car sales in the near future.