Honda reports a small drop in profits despite a big drop in sales

Atlas Honda Limited (PSX: ATLH ) announced Rs. 1.408 billion in earnings for the quarter ended December 31, 2022, depicting a 3.7 percent decline from Rs. 1.46 billion in the corresponding period last year.

This took the nine-month profit to Rs. 3.68 billion, down 5.64 percent compared to Rs. 3.95 billion were recorded in the corresponding period last year.

The company has posted a profit of Rs. 11.35 per share compared to Rs. 11.80.

The variance in earnings arose primarily as a result of a lower than estimated effective tax rate. The company has not announced a cash dividend this quarter following its strategy of announcing dividends twice a year, according to a report by Ismail Iqbal Securities.

The company’s sales during the quarter fell 3 percent compared to Rs. 36.26 billion recorded in the corresponding period last year with multiple price increases in the quarter.

However, the company’s sales rose 19% quarter-on-quarter (QoQ). The rise in revenue was driven by higher volumetric sales which improved by approximately 9 percent QoQ (units sold: 272,638).

Gross margin stood at 6.7%, reflecting an increase of 1.8 percentage points from the last quarter. The gross margin boost could be attributed to higher volume sales and upward price revision of bicycles during the quarter.

Other income remained flat at Rs. 1.085 billion, improving by 120 percent compared to Rs. 492 million. ATLH’s effective tax rate was 36% during the quarter compared to 45% last quarter.

The company’s scrip on the stock exchange closed at Rs. 274.99, increased by Rs. 9.49 or 3.57 percent, with a turnover of 2,200 shares on Wednesday.

Given recent production issues, bike sales have suffered. Additionally, Honda has announced multiple price hikes in recent months, which has affected its demand. Given the current economic situation, it looks like there are more price increases and sales decreases.



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