Honda Atlas Cars has announced its financial results for the year that ended on March 31st 2019.
The company posted a profit of Rs. 3.85 billion, showing a massive decrease of 40.68% in profits as compared to Rs. 6.49 billion in the previous year.
However, Honda posted a growth of 4% in overall sales which went up to Rs. 95.12 billion against Rs. 91.52 billion in the corresponding period last year. The sales increased on the back of multiple upward price revisions during the year and rupee’s devaluation.
Despite a 4% revenue improvement, gross profit was down 30.10% YOY due to Rupee’s devaluation and the increase in the cost of sales by 8.33% to Rs. 87.82 billion against Rs. 81.07 billion in the previous year.
To ease the overall impact of the high growing costs, the company has been raising prices. The weakening rupee has wreaked havoc. Honda again didn’t pass on Rupee’s devaluation impact against USD to end-consumers which has weighed down on the company.
The rupee weakening (since Dec-17) has forced their hands as they still depend considerably on high value imported parts.
Units Sold in FY19
|Models||Units Sold in FY19||Units Sold In FY18||Difference|
|Civic and City||42945||40958||4.85%|
Amid a decrease in overall volume, Honda still posted a growth in sales. However City and Civic were the top sellers for the company again with Honda BR-V showing a big drop in sales.
It also saw an increase in distributing and marketing costs by 1.62% to Rs. 931 million and administrative expenses by 18.07% to Rs. 800 million.
However, the other operating income was down by 30.24% to Rs. 1.31 billion as compared to Rs. 1.88 billion in the corresponding period. Moreover, operating expenses increased by 2.93%.
A minimal relief was seen which due to a decline in finance costs (down by 22%) and taxation (down by 41%).
Along with the result, HCAR also decided to pay out a final cash dividend of Rs. 12.15 per share, i.e. 121.5%, for this year. Earnings per share of the company decreased to Rs. 26.97 as compared with Rs. 45.48 last year. HCAR’s script at the bourse closed at Rs. 124.49, up by 4.99% or +5.92 with a turnover of 0.49 million shares on Monday.
What Lies Ahead for Honda?
Honda’s future lies with the demand from the consumers and economic fundamentals, which don’t look that good at the moment as the country is facing an overall economic slowdown.
With higher interest rates, cost of financing will rise. The demand may be affected in the coming period as well.
Honda may also face tough competition from the upcoming new players plus the impact of the exchange rate will also be seen in the earnings.