Honda Atlas profit tops estimates on strong demand

KARACHI: Honda Atlas Cars (Pakistan) Ltd on Friday reported a 54 percent jump in nine-month earnings that beat analysts’ expectations, boosted by strong local demand and reduced financial cost

The Japanese car maker’s net profit grew to Rs2.42 billion for the nine-month ended December 31, 2015, from Rs1.57 billion a year earlier. The earnings per share remained at Rs16.97 from Rs11.03 in 2014, said a statement issued to the Pakistan Stock Exchange.

The company’s sales surged 10.5 percent to Rs27.89 billion from Rs25.26 billion last year.

“The result was slightly above our expectations,” said analyst Muhammad Tahir Saeed at Topline Securities in a post result comments.

Saeed said the car sales of the firm increased 15 percent to 17,827 units in the nine-month period. “Honda managed to maintain its volumes in spite of the launch of Toyota Corolla new model by Indus Motor.”

“Sales mix between Honda City and Honda Civic has changed as volumes of the latter are declining in anticipation of the new model,” he said.

He also attributed the growth to the decline in steel price in the world markets and a favourable exchange rate of the rupee against major currencies.

“Gross margins of the company improved 412 basis points to 15.4 percent in the third quarter of the current fiscal and we think this improvement was back by a 22 percent year-on-year decline in the international steel prices and favourable exchange rate of rupee against both the U.S. dollar and Japanese Yen,” Saeed said. “Thus, gross profit jumped 59 percent to Rs1.1 billion in 3Q2016 compared to Rs664 million in 3Q2015.”

He said on-quarter-on-quarter basis, revenue of the company witnessed a decline of 29 percent owing to year-end phenomenon and muted volumes of Honda Civic in anticipation of its new model launch in July 2016.

“Bottom-line earnings of the company in 3Q2016 declined 16 percent QoQ to Rs612 million (EPS: Rs4.2) mainly due to volumetric decreases,” Saeed added.

The finance cost reduced 73 percent to Rs4.67 million from Rs17.47 million.

The manufacturer recorded a profit from operations at Rs2.42 billion, which is 37 percent higher than Rs1.57 billion in the corresponding period.

Only in the quarter ended December 31, the profit-after-tax climbed 71 percent to Rs611.92 million from Rs358.48 million in the same quarter in 2014.

The share price of the car manufacturer surged two percent, or Rs4.97, to Rs248.98 with 365,400 shares turnover.