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Rosy outlook for Honda Atlas Cars

In Pakistan, Honda Atlas Cars (Pakistan) Limited remains committed towards its objective of maximizing value creation. This is being attained by concentrating business resources to improve operating flexibility, optimizing cost structure, execution of growth projects and investment in new technologies. During financial statements for the third quarter closed December 31, 2017, the company’s financial experts mentioned that Honda Atlas Cars experienced a strong market demand of its product and attained 54.55 percent and 50.57 percent growth in production and sales respectively. During the period, the company produced 36,057 units as compared to 23,330 units produced in the nine months period of previous year. Sales too, enhanced to 35.840 units as compared to 23,816 units of previous year. The company is aiming to attain its highest-ever production and sales by the end of fiscal year 2018.

LIGHT VEHICLE SALES
Details2018e2019e
Units (in mil.)% change (year on year)Units (in mil.)% change (year on year)
U.S.16.6-17.1(2)-016.5-17.0(0.5)-0.0
China29.5-30.0 1.5-3.530.0-30.51.5-3.0
Europe20.5-21.02.0-3.520.8-21.12.0-3.5
APAC (excluding China)15.8-16.31.0-2.016.0-16.51.0-2.0
Global95.0-97.02.0-3.097.0-100.01.0-2.0

According to the financial statement, net sales revenue of the company for the period under review was Rs65,746.08 million as compared to Rs41,729.03 million of the same period previous year, up by 57.55 percent. The cost of sales also rose accordingly to Rs57,759.24 million as compared to Rs35,420.67 million. Gross profit enhanced by 26.61 percent to Rs7.986.84 million as compared to Rs6.308.36 million of the last period chiefly because of growth in unit sales by 51 percent. With increase in operations, Selling & Administrative (SGA) expenses rose to Rs965.41 million as compared to Rs691.14 million, though in terms of sales, the SGA expenses declined from 1.66 percent to 1.44 percent. Other income at Rs1.416.08 million as compared to Rs 665.60 million for the same period was up by 112.45 percent owing to better fund management. Other expenses rose to Rs826.40 million as compared to Rs 424.97 million generally because of higher allocation towards Workers Profit Participation (WPPF) and Workers Welfare Fund (WWF), which rose by 32.56 percent during the period and exchange loss of Rs270.37 million. They also mentioned that the financial expenses declined to Rs19.09 million in the same period of last year. Profit before tax at Rs7,619 million, enhanced by 30.50 percent as against the last year’s profit of Rs5,838.76 million. After tax provision, net profit for the period was Rs 5,120.77 million as compared to Rs4,015.87 million up by 27.51 percent. The earnings per share (EPS) was Rs35.86 as compared to Rs28.12 of same period last year. The Rupee was having sustained its parity with US$ for one & half year at Rs105 approximately, devalued by 4.68 percent in December 2017.

The cost impact is high and the company has been forced to pass it on to customers in the shape of price increase of Rs50,000 to Rs60, 000 on different variants of Honda Civic & Honda City, with effect from January I, 2018. Since the launch of CMC in July 2016 and addition of third model of Honda BRV in April 2017, in addition to the elegant Honda City, market demand for the company products consistently remained high.

Honda Atlas Cars is gradually raising its production capacity in dissimilar phases to meet customer demand. In December last year, the company moved to raise daily production by 11 percent to 200 units per day with effect from January 1, 2018. Over the last one & half year the company has doubled its production to fulfill market demand.

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Historical review of automobile sector

Different studies calculated that during 1947, there were neither any automobile assembly plants nor any sector capability available in our country for the manufacturing of cars, light commercial vehicles, motorcycles, trucks and buses. Investment in the automobile sector in Pakistan started in the mid-‘50s when Kandawallah Industries (later known as Naya Daur Motors) organized its units for assembling buses and trucks. This highlights the most common mode of commuting used by majority of the people–public transport.

According to facts quoted by National Transport Research Centre, Pakistan inherited 3,618 motorcycles, 12,749 cars, 4,576 buses and 928 cabs, contributing to a total of 30,577 registered vehicles in 1947. By 1997, all the statistics had drastically hiked up to 1,712,759 motorcycles, 635,534 cars, 75,519 buses, 66,398 cabs and 62,443 rickshaws, amounting to approximately 3.5 million registered vehicles. Yes, the collective length of high and low type roads has been increased from 50,367 km in 1947 to 228,206 km by 1997, yet the absolute mayhem witnessed on Pakistani roads narrates a different tale.

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