Honda Reports Minor Decrease in Profit Despite Big Sales Slump

Atlas Honda Limited (PSX: ATLH) has announced Rs. 1.408 billion profit for the quarter that ended December 31, 2022, depicting a 3.7 percent dip from Rs. 1.46 billion in the same period last year. This took the nine months’ profits to Rs. 3.68 billion, down by 5.64 percent compared to Rs. 3.95 billion recorded in the same period of last year. The company has posted earnings of Rs. 11.35 per share compared to Rs. 11.80. The deviation in earnings primarily emerged as a result of a lower than the estimated effective tax rate. The company has not announced any cash dividend this quarter following its strategy to announce dividends twice a year, according to a report by Ismail Iqbal Securities. The sales of the company during the quarter saw a dip of 3 percent compared to Rs. 36.26 billion recorded in the corresponding period last year with multiple price hikes in the quarter. However, the sales of the company were up 19 percent Quarter on Quarter (QoQ). The jump in revenue is led by higher volumetric sales which improved by roughly 9 percent QoQ (units sold: 272,638). Gross margin clocked in at 6.7 percent, which reflects an increase of 1.8 percentage points from the last quarter. The enhancement in gross margin could be attributed to higher volumetric sales and an upward revision in bike prices 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 came at 36 percent during the quarter as compared to 45 percent in the last quarter. The company’s scrip at the bourse closed at Rs. 274.99, up by Rs. 9.49 or 3.57 percent, with a turnover of 2,200 shares on Wednesday. Given the recent production hiccups, bike sales have suffered. Furthermore, Honda announced multiple price hikes over the past few months, which has impacted its demand. Given the current economic situation, more price hikes and sales reductions seem afoot.