Honda Atlas Cars Limited (HCAR) recently released its fiscal year ending March 31, 2023 (FY23) financial report, revealing a significant decline in Honda profits.
The company’s profit after tax fell by 89.6 percent year on year (YoY), reaching Rs. 260.14 million, compared to Rs. 2.5 billion the previous year.
Surprisingly, Honda Atlas Cars did not declare a cash dividend for the fiscal year, indicating the automaker’s difficulties.
- Overview of Financial Performance
Honda Atlas Cars lost Rs. 5.8 per share in the fourth quarter (January-March) of FY23, compared to earnings of Rs. 5.7 per share the previous quarter.
The difference was primarily due to higher-than-expected operating expenses, which could have been caused by significant foreign exchange losses during the quarter.
The company’s sales decreased by 12% year on year, totaling Rs. 95.08 billion compared to Rs. 108.04 billion in the same period last year.
The company’s revenue in the fourth quarter of FY23 was Rs. 22.3 billion, a 3% decrease on a quarter-on-quarter (QoQ) basis.
Despite multiple price increases during the quarter, the drop in volumetric sales contributed to the revenue decline.
- Profitability and Margin
HCAR reported a gross profit of Rs. 7.16 billion, a 29.4% increase over the same period last year. The gross margin reached 12.5 percent, the highest since the first quarter of FY18, indicating better cost management and operational efficiency.
- Costs of Distribution and Marketing
The decrease in distribution and marketing costs was one of the financial report’s highlights. In FY23, these costs totaled Rs. 902.37 million, a decrease from the previous year’s figure of Rs. 1.14 billion.
- Other Earnings
Honda Atlas Cars increased its other income by 15.8 percent for the full year, totaling Rs. 2.32 billion compared to Rs. 2 billion the previous year.
Other income increased by 110 percent year on year in the fourth quarter of FY23, totaling Rs. 683 million. This rise can be attributed to low deposit rates.
- Finance Charges
The exponential increase in finance costs, which increased by a staggering 549.8 percent during the full year, from Rs. 53.26 million to Rs. 346.14 million, was one of the significant challenges faced by Honda Atlas Cars. This increase in finance costs put additional strain on the company’s financial performance.
- EPS (Earnings Per Share)
HCAR’s earnings per share (EPS) for FY23 were Rs. 1.83, a significant decrease from the previous year’s EPS of Rs. 17.58. The drop in EPS reflects the automaker’s difficult operating conditions and financial impact.
- Performance of Stocks
The poor financial results weighed on HCAR’s stock performance. The stock closed at Rs. 97.5 on the bourse, down 3.74 percent or Rs. 3.79. On the given day, the trading volume was 128,577 shares.
Honda’s Production and Sales Issues
In terms of production and sales, Honda Atlas Cars had a turbulent year. Due to supply chain issues caused by import restrictions, the company’s output was severely impacted for two months.
In fact, Honda sold 207 vehicles last month, which was a record low. Surprisingly, Honda Civic sales, the company’s flagship sedan, have reached an all-time low.
However, Honda recently announced that production will resume soon, citing a “slight improvement in the accessibility of trade financing facilities” as the catalyst. Unfortunately, no specific date for production resumption was provided.
- Prospects for the Future
Given the ongoing challenges in the auto industry, Honda’s sales are expected to be lukewarm at best. To regain its foothold in the industry, the company will have to overcome a number of challenges, including supply chain issues, competitive market dynamics, and changing consumer preferences.
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