Honda earns Rs 1.050 bln in April-June


Honda Atlas Cars (HCAR) Tuesday reported earnings of Rs 1.050 billion in April-June 2016, down by 3.2 per cent compared to same quarter of last year. It shows earning per share of Rs 7.4.

The company’s sales went down by 7 per cent year-on-year to Rs 10.5 billion in the previous quarter.

This can be attributed to car sales for April-June period clocking in at 7,184 units, almost flat compared to the same period of last year, and change in sales mix between Honda Civic and Honda City – customers opting for City, the lower priced brand, over Civic in anticipation of the launch of 10th Generation model of the Civic.

The company’s gross profit declined 10 per cent year on year to Rs 1.6 billion and gross margins fell by 48 basis points to 15.4 per cent. This slight decline in gross margins shows that Yen’s appreciation against the US dollar (8 per cent QoQ) has not significantly impacted the company’s margins in the outgoing quarter.

Going forward, Yen’s appreciation may not be significant as the Japanese government’s fiscal expansion policies are expected to pick up pace, analysts believes.

On quarter-over-quarter basis, revenue fell 14 per cent due to tepid sales volume for the aforementioned reasons. Gross profits declined 13 per cent, but margins were maintained between the two periods.

HCAR’s earnings were supported by 32 per cent decline in tax expense to Rs 362 million as the company’s effective tax rate came in at 26 per cent.

The latest model of Honda Civic was revealed last week. It is available in 3 variants – two with engine capacity of 1.8 liters priced at Rs 2.3 million and Rs 2.5 million, respectively, and a 1.5 liter Turbo one priced at about Rs 3.0 million

An analyst at Topline brokerage house said unfavorable movement in exchange rate and commodity prices, regulatory changes which can allow import of used cars, and lower than expected demand of new Civic model post-launch may further hurt the company’s profits.