Honda Atlas Cars Limited (HCAR) recently released its financial report for the fiscal year ending March 31, 2023 (FY23), revealing a significant decline in Honda profits. The company’s profit after tax plummeted by 89.6 percent year-on-year (YoY), reaching Rs. 260.14 million compared to the previous year’s profit of Rs. 2.5 billion. Surprisingly, Honda Atlas Cars did not announce any cash dividend for the year, indicating the challenges faced by the automaker.
Financial Performance Overview
During the fourth quarter (January-March) of FY23, Honda Atlas Cars experienced a loss of Rs. 5.8 per share, contrasting with the earnings of Rs. 5.7 per share in the previous quarter. The deviation primarily resulted from higher-than-estimated operating expenses, potentially caused by substantial foreign exchange losses during the quarter. The company’s sales throughout the year witnessed a 12 percent decline, totaling Rs. 95.08 billion compared to Rs. 108.04 billion in the corresponding period last year. In the fourth quarter of FY23, the company’s revenue amounted to Rs. 22.3 billion, reflecting a 3 percent decline on a quarter-on-quarter (QoQ) basis. Despite multiple price revisions during the quarter, the decrease in volumetric sales contributed to the decline in revenue.
Gross Profit and Margin
HCAR reported a gross profit of Rs. 7.16 billion, marking a 29.4 percent increase compared to the same period last year. The gross margin reached 12.5 percent, the highest recorded since the first quarter of FY18, which may indicate improved cost management and operational efficiency.
Distribution and Marketing Costs
One positive aspect highlighted in the financial report was the decrease in distribution and marketing costs. In FY23, these costs amounted to Rs. 902.37 million, showing a reduction compared to the previous year’s figure of Rs. 1.14 billion.
Other Income
Honda Atlas Cars experienced a 15.8 percent increase in other income during the full year, totaling Rs. 2.32 billion compared to Rs. 2 billion in the previous year. In the fourth quarter of FY23, other income surged by 110 percent on a QoQ basis, amounting to Rs. 683 million. This increase can be attributed to attractive deposit rates.
Finance Cost
One of the significant challenges faced by Honda Atlas Cars was the exponential surge in finance cost, which escalated by a staggering 549.8 percent during the full year, from Rs. 53.26 million to Rs. 346.14 million. This rise in finance costs exerted additional pressure on the company’s financial performance.
Earnings per Share (EPS)
HCAR’s earnings per share (EPS) for FY23 stood at Rs. 1.83, in stark contrast to the EPS of Rs. 17.58 reported in the previous year. The decline in EPS reflects the challenging operating conditions and financial impact experienced by the automaker.
Stock Performance
The adverse financial results had an impact on HCAR’s stock performance. The company’s scrip at the bourse closed at Rs. 97.5, down 3.74 percent or Rs. 3.79. The trading volume amounted to 128,577 shares on the given day.
Honda’s Production and Sales Challenges
Honda Atlas Cars faced a tumultuous year in terms of production and sales. The company’s output was severely affected for two months due to supply chain issues resulting from import restrictions. In fact, last month, Honda recorded minimal sales, with only 207 cars sold. Surprisingly, the sales of the Honda Civic, the company’s flagship sedan, reached an alarming zero. However, the recent notification from Honda indicates that production will soon resume, citing a “slight improvement in the accessibility of trade financing facilities” as the catalyst. Unfortunately, the exact date of production resumption was not disclosed.
Future Outlook
Considering the ongoing challenges in the car market, it is expected that Honda’s sales will remain lukewarm at best. The company will need to navigate through various obstacles, including supply chain issues, competitive market dynamics, and changing consumer preferences, to regain its foothold in the industry.
