Atlas Honda’s Profits Decline by 30% in Q1 of Current Financial Year

Atlas Honda Limited, which is a top motorcycle manufacturer in the country, announced its financial results for the first quarter 1QMY20.

The CD-70 maker announced a profit of Rs 842 million which is down by 30% as compared with Rs 1.19 billion in the same period last year. The company posted sales of Rs 22.83 billion, which showed a growth of 3.18% from Rs 22.12 billion amid a decline in volumetric growth coupled with upward revision of prices.

The company sold over 291,038 units during the quarter, showing a decrease of 6.7% from 311,951 units sold in the same period last year. This is no surprise as the country is seeing an overall economic slowdown.

The cost of sales of the company grew by 5.55% to Rs 21.11 billion as compared with Rs 20 billion in the same period last year which took the gross profit to Rs 1.71 billion, decreasing by almost 20% as compared with Rs 2.12 billion .

Gross margins during the first quarter trimmed down owing to the rise in input prices as a result of Rupee’s devaluation against the US dollar. The increase in prices mitigated the impact of rise in input prices which was insufficient to sustain the margins. This was due to continued devaluation of Pak rupee against USD and Japanese Yen which resulted in substantially higher input costs.

Sales and marketing expenses rose to Rs. 524.1 million, an increase of 9%, which is attributable to higher volumes and promotional activities. Administrative expenses remained stagnant due to measures introduced for maximization of cost efficiencies. Other income, other operating expense and financial charges, contributed Rs. 169.7 million to the bottom line, 10.6% higher than the comparative period.

This translated into Earnings per Share (EPS) of Rs. 6.79 against Rs. 9.63 (restated) for the corresponding period of last year

The production is expected to grow going forward along with demand. The company has continued to grab the market with its brand recognition and new lines of production as well as newer models of motorcycles.

However, there is a tough competition from the Chinese makers, especially in the 70cc motorcycle which incidentally is also the highest selling segment for ATLH.

ATLH shares were last traded at a price Rs 313.95 on Tuesday.

What Lies Ahead?

Overall, the automotive industry is going through a tough phase and it is here to stay for some period. Buying powers have already reduced as inflation is continuously rising. Honda has also raised prices along with other competitors as they are unable to absorb the significantly higher costs.

The overall buying power of the consumer has gone down while the motorcycles are more expensive.