Honda Pakistan records 40 per cent increase in earnings

Honda Atlas Cars Limited (HACL) concluded the financial year with a 40 per cent increase in earnings, giving investors reason to be optimistic. This is despite several challenges including an ongoing chip shortage, rising commodity prices on overseas markets, hefty freight rates, and the rupee’s depreciation.

“The result is below our expectations, which is mainly due to higher-than-expected distribution costs and effective tax rate,” Ismail Iqbal Securities auto sector analyst Muqeet Naeem stated.

The automaker benefited from the fact that demand for four-wheelers remained high despite the problems.

Honda purchasers appear to be unconcerned with price changes, preferring to purchase their preferred vehicles whenever they want, regardless of how much more expensive they are now than they were only two years ago.

Prices have continued to rise at a rapid pace. There may also be a sense that prices will continue to rise. However, in a market known for “own money” or high premiums, continued demand despite price increases should not be surprising.

The earnings per unit sold is a great marker of how quickly prices have risen. Honda sold 57 per cent more automobiles in MY22 than the previous year, which ended in March 21.

The introduction of a new Civic generation considerably attributed to Honda’s sales growth.

Not only have imports become more expensive as the PKR has depreciated against the greenback, but inflationary pressures on inputs and rising fuel prices have also contributed to cost increases. Revenue and cost per unit sold have generally increased in lockstep.

As a result, despite strong demand growth, margins have fallen to 5 per cent.

Other income, which consists of customer advances, has significantly bolstered the company’s profitability. Other income boosted the bottom line by 47 per cent in MY22, compared to 33 per cent the previous year. This also suggests that demand will continue to rise in the coming months.

However, as lending rates continue to skyrocket, the company may lose demand from purchasers who plan to finance their vehicles through a bank.