KARACHI: Honda Atlas Cars Limited (HCAR), the Pakistani subsidiary of the Japanese automaker, reported a 90% decline in its earnings for the year ended March 2023 (MY23), due to lower sales volume and substantial foreign exchange losses.
The company held its Analyst Briefing yesterday to discuss its financial highlights and outlook. According to its financial statements, HCAR posted MY23 earnings per share (EPS) of Rs1.8, down from Rs18.4 in the previous year. The company also skipped any dividend payout for MY23.
The main reasons for the poor performance were lower volumetric sales and higher currency exposure. HCAR’s sales volume decreased by 32% year-on-year, amounting to 25,726 units, mainly due to restrictions on letters of credit (LCs) and weak demand amid high interest rates and inflation. The company also incurred a foreign exchange loss of Rs4.5 billion, as the Pakistani rupee depreciated sharply against the US dollar, the Thai baht and the Japanese yen during the year. The company relies heavily on imports to fulfill its raw material needs, which makes it vulnerable to currency fluctuations.
The company also faced higher financial charges due to high interest rates prevalent during the year, which increased its borrowing costs and reduced its profitability.
The company maintained its market share of 16% in MY23, while its competitors Indus Motor Company (INDU) and Pak Suzuki Motor Company (PSMC) captured market shares of 18% and 52%, respectively. The new entrants Kia and Hyundai had market shares of around 7% each.
The company increased its car prices multiple times during the year to protect its margins from currency devaluation and rising steel prices. However, this also affected its sales volume and customer affordability. The company said that any further devaluation of the rupee could result in additional price hikes for cars.
The company’s localization level in terms of parts stands at 71%/61%/52%/55% for City/Civic/BRV/HRV, respectively. However, localization in terms of value remains lower than these figures. The company said that it is working on new models and variants, including a hybrid car, to cater to the changing customer preferences and environmental regulations.
The company expressed concerns over the challenges faced by Pakistan’s automobile sector, such as weak demand, rapid price escalation, expensive auto financing, higher taxes, and deteriorating macros. The company said that while there are signs of supply side recovery, the path to normalcy for the sector remains uncertain. The company expects persistent demand-related challenges to negatively impact sales volumes in the coming months.
The company’s stock closed at Rs191.5 per share on Wednesday, down by 1.8% from the previous day.