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Corporate results: Honda Atlas finally on the right track

The Express Tribune


Corporate results: Honda Atlas finally on the right track

By Farhan Zaheer
Published: May 22, 2013
Auto assembler posts profit after incurring losses for four straight years, according to Sherman Securities. PHOTO: FILE
KARACHI: 
Honda Atlas Cars has reported Rs244 million as profit after tax for the year ending March 2013, up from a loss of Rs532 million last year. The company announced earnings per share (EPS) of Rs1.71 in 2013 compared to loss of Rs3.73 per share last year.
Analysts say the company is on the growth track, and its immediate outlook is positive like other auto companies operating in the country.
“Honda Atlas, like other auto companies operating in the country, is going to do good business in the near future,” said Atif Zafar, analyst at JS Global Capital.
Overall, the post-election economic scenario of the country is positive, as the incoming government is here with an aim to improve economic outlook. “I think the outlook of the auto industry is already positive because of the depreciating yen, which is bringing down the cost of production for auto companies, and the low imports of used imported cars since December 2012,” said Zafar.
“Moreover, volumetric sales of Honda and other auto companies are also expected to increase,” he added.
The auto industry’s sales in the next one year will depend on the core policies of Nawaz Sharif’s government. These include its macroeconomic policies, its policy for the auto industry and what this government wants to do about the wheat support price, said Sarfaraz Abbasi, analyst at Summit Capital.
“Auto sales will further increase in the next eight to 10 months if the government introduces a new policy for the auto sector, especially [if it is in the form of] a new five-year Auto Industry Development Plan,” he added.
This is the first time that Honda Atlas Cars has announced a dividend with its results, a modest Rs0.25 per share. The company has posted the annualised profit after remaining in losses for four consecutive years, Sherman Securities reported on Tuesday. Though the dividend payout is small, this is the company’s first cash dividend after seven years, the report said.
During 2013, the company’s EPS remained higher due to a more than 55% increase in volumetric sales and improvement in margins. The new Civic model launched by the company received a favourable response, while revised prices of the new model also lifted overall gross margins of the company.
In the March quarter alone, the company posted a robust Rs1.6 in EPS, which remained 181% higher than the preceding quarter’s earnings. Higher quarter-on-quarter (QoQ) earnings are due to a 67% improvement in car sales and a single percentage point improvement in gross margins.
In the March quarter alone, the company sold 6,463 units, while the gross margin of the company stood at a healthy 5.4%. Where higher car prices boosted QoQ margins, devaluation of the Japanese versus the rupee also supported profits.
Published in The Express Tribune, May 22nd, 2013.
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