Atlas Honda 2019 report final PDF

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[REPORT]

Maheer Shaukat Muskan Munir Shiza Khan Hassan Shahid Saqib Khanani

INTRODUCTION Atlas Honda Limited is a public listed company which was incorporated on October 16, 1962. It is a joint collaboration between Honda Motor Company Limited Japan, the largest and most reputed motorcycle brand in the world, and Atlas Group, one of Pakistan’s most renowned business merged. The Company is principally engaged in modern manufacturing and marketing of motorcycles and spare parts. Atlas Honda Limited is the largest motorcycle manufacturer in Pakistan with the strongest brand value and highest customer loyalty. The Company is considered a pioneer of motorcycle industry in the country and has been leading two wheeler market successfully for over 50 years. The Company currently has a production capacity of over 1.35 million units per annum and continues to maintain its status as market leader both in terms of both quantity and quality. It also exports its motorcycles and spare parts to Bangladesh and Afghanistan. With highest quality products, state of the art manufacturing facilities, largest dealership network & exquisite after sales service, Atlas Honda Limited is today considered a benchmark for two wheeler manufacturing. It has been proudly and successfully fulfilling its role as the flag bearer of motorcycle industry in Pakistan. As one of the largest tax payers in the private sector and being one of the best employers in the country, Atlas Honda Limited stands as a beacon of light for the corporate, social and intellectual sectors of Pakistan. PRODUCT The product line of Atlas Honda is more extensive than that, however, and includes a wide range of motorcycles. In the 70-cc category, there is 

Honda CD70



CD70 Dream In the mid-range: 

Prider (100cc)



CG125

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CG125Self



CB125E

The Atlas Honda Cars Pakistan, it is a Pakistani automobile manufacturer based in Lahore which is a subsidiary of Japanese car-maker named HONDA, the company’s Stock is traded on the Pakistan Stock Exchange. Atlas Honda is determined to revolutionize companies operation by research and theory. The leadership style, the management role, classifications and procedures are made and altered according to the current market trends.   

Honda City Honda Civic Honda Accord

OVERVIEW Since transport demand increases with development, it plays a very important role in social development and is one of the major sectors of the economy. Pakistan has achieved reasonable economic growth in recent years due to steady unemployment and increased foreign investment (although the results over the past year have not been as promising). Despite the problems of overcapacity and low profitability, the automotive industry has maintained a strong influence and importance. In the past two decades, the use of vehicles has increased significantly with the population, the infrastructure has been improved, the mobility of people from place to place for work and living standards has increased, and the demand for vehicles has also increased. Pakistan's auto market is attractive to domestic and foreign investors and has the potential to make a profit. There are foreign companies that are interested in investing in the automotive industry in Pakistan. 2018 was a positive year for the sector in terms of interest shown by several car manufacturers in the Pakistani market. It is encouraging that Pakistan is in high demand for cars, and people can buy bicycles, cars, luxury cars and other modes of transportation. In recent years, we have seen disposable income, lifestyle changes and economic conditions increase. As a result, we have seen an increase in demand for luxury commercial vehicles. Although the Pakistani automotive sector is developing, it faces many challenges. Sales of the auto industry declined 6 percent in the first two months of FY19, the first time since FY15. The auto industry is struggling with three factors due to the depreciation of the rupee, price hikes, lower interest rates for car loan buyers and the restriction on the sale of tax-free individuals. Today, in this pandemic circumstances we have also seen the decline in the purchase of cars.

ATLAS GROUP – Shirazi Group:

Honda Atlas Cars Pakistan Limited is a joint venture between Honda Motors Company Limited, Japan and the Atlas Group of Companies, Pakistan. Both motorcycle manufacturing concerns were established by Atlas Group. In addition, a third concern, Atlas Pak Ltd., was assumed by the Bangladeshi government in 1971 after the fall of Dhaka. AHL manufactures and sells Honda motorcycles in collaboration with Honda Motor Company. Founded on November 4, 1992. Atlas Group also manufacture a variety of high-tech components internally with key partners. It has now became a group of seventeen companies, out of which six are public limited companies. The ‘Big Three’ of Pakistan’s auto industry – Suzuki, Honda and Toyota dominates the car market. According to the findings, other automakers only share 9% of Pakistan’s car market. The following is the market share of Atlas Honda compared with its Competitors.   

Toyota 35% market share Pak Suzuki maintain 29% Honda Atlas Cars maintain 27% dominance.

Chairman report This is an unaudited interim financial information of the Company for nine months which ended December 31, 2019.

Macroeconomic overview

Pakistan’s economy is steadily moving on the road to the adaptation path. Showing less to no promising signs, the macroeconomic variables have displayed a mixed performance. The expected GDP growth is to remain constantly at 2.8%. This transformation is due to the policy induced. Regardless of the multiple ups and downs of the policy rate, the inflation has consistently raised and it is expected to be nearly 12% in the year 2019-2020. This is all linked to the factors of cost push like devaluation of Pak rupee, etc. The stabilization measures is based upon many factors, the payback is quiet noticeable. Moreover there was an increases seen in the collection of the revenue of about 16.95% in the first half, which was because of the revenue and administrative procedures of the last year’s budget. Starting from the external frontal, Pakistan's current deficit is shirked by 73% to the US dollar of 1.82 billion during 5 months of the year 2020 compared to the exact period last year. This happened due to the compression of imports by 21%. The Exports managed to grow noticeable in calculated volumetric terms. The Remittances also pointed up by 3.3% in the beginning half of 2019-2020. The above mentioned factors allowed the Pakistani Rupee to achieve its stability and also regain its lost value compared to the US Dollar, which was at Rs. 155.

Operating results As of the third quarter, the Company achieved its net sales of Rs. 22.8 billion, with the rise of 18% compared to the last year. The Increase in sales mated with a continuous cost minimization measures has made the gross profit to rise with over Rs. 1.6 billion. This is a result of the larger volumes, the increase in cost and includes the general effects of inflation. Moreover, other income, the net of charges and other operating expenses, also lined up to the bottom line. This reached to Rs. 0.3 billion, which is 52% greater than the Quarterly Report of 2019 Sales. As a result, the business noted its net profit before tax of Rs. 1.2 billion during the quarter 2019. The Net profit after tax rose to Rs. 0.8 billion, with the increase of 45% compared to last year. This interpreted into Earnings per Share of Rs. 6.69 as of Rs. 4.61 of last year. During the nine months of December 31, 2019, the Company accomplished its net sales of Rs. 64.1 billion, with an increase of 5.8% compared to last year’s performance. However, gross profit declined by Rs. 4.9 billion to Rs. 4.6 billion. This was due to the reduction in the devaluation of Pak rupee against the US Dollar and Japanese Yen. The company’s Sales and marketing expenses also rose up by Rs. 1.50 billion, with a compared increase of 7.7%.,which resulted due to the cost of promotional activities and fuel expense. Administrative expenses also rose up by 5.1% mainly due to inflation. Accordingly, the Company achieved its profit after tax of Rs. 2.24 billion, show casing the decrease of 10.8%. This interpreted into Earnings per Share of Rs. 18.1 against Rs. 20.3 for the same period as of last year.

Future look

Going ahead, it is essential that the Government continues to situate its structural accountabilities and helped place the economy on a balanced and sustainable growth path. This will recommend that the current program needs to be assisted with the reforms. The Expansion of projects under the CPEC and collaboration in the sectors will be involved. As the macroeconomic conditions enhance and the structural reforms support the investment, growth is suspected to move forward. This will further boost up the demand for the two wheelers as well. In this regard, the Company believes that the principles of the Atlas will continue to assist the firm a proposition for its incoming endeavors.

Acknowledgment The Atlas Group takes significant pride in its collaborated scheme with Honda Motor Company Limited and would like to acknowledge the continued support and cooperation in maintaining high standards of excellence and progress. The chairman thanks its valued customers for the confidence they have placed in us, the management team for their sincere and honest efforts, the Board of Directors for their guidance, the C.E.O. for his inspiration and motivation and all the stakeholders and shareholders for helping Atlas Honda Limited build its destiny into a unique company.

Summary of Auditors’ Report We have audited the annexed financial statements of Atlas Honda Limited (the Company), which comprise the statement of financial position as at March 31, 2019, and the statement of profit or loss and other comprehensive income, the statement of changes in equity, the statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information, and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit.

Key Audit Matters: 1. Capitalization of property, plant and equipment: We identified capital use brought about during the year as a key review matter as this speaks to noteworthy exchanges and includes certain judgmental zone, for example, capitalization of qualified expense according to bookkeeping and revealing principles.

2. Revenue recognition: The Organization has created income from deals of cruiser what's more, save parts. The income acknowledgment is distinguished as a key review matter because of its criticalness as key marker for execution of the executives and makes an intrinsic hazard that income could be misquoted to meet targets.

Financial position of the company In terms of liquidity Atlas Honda has being doing very good their current ratio has remained constant over the years and is doing well than the industry which means company won’t face liquidity problems and can easily convert their assets into cash and the company is also less dependent on its inventories. In terms of leverage the company has been debt free for almost seven years. During the years Atlas Honda has financed all projects through equity. In terms of activity the company has a good credit policy and high quality customers. The company has also being doing well in converting its inventories into cash. The company has also being utilizing their assets very wisely in order to generate sales. In terms of profitability the gross profit and net profit margin both are increasing over the years but it is still less than the industry average it can happen because the overhead expenses of company is high. The ROI and ROE is higher than the industry which means shareholders will get higher returns and will likely to invest more in Atlas Honda. The Earnings per share has also been increased which is a very good for the company as shareholders will be interested. In my opinion the company has been doing well and has been improving over the years.

THE CURRENT CRISIS AND THE IMPACT ON THE INDUSTRY The current crisis: The coronavirus COVID-19 pandemic is the defining global health crisis of our time and the greatest challenge we have faced since World War Two. Since its emergence in Asia late last year, the virus has spread to every continent. Countries are racing to slow the spread of the virus by testing and treating patients, carrying out contact tracing, limiting travel, quarantining citizens, and cancelling large gatherings such as sporting events, concerts, and schools. But COVID-19 is much more than a health crisis. By stressing every one of the countries it touches, it has the potential to create devastating social, economic and political crises that will leave deep scars Every day, people are losing jobs and income, with no way of knowing when normality will return. Small island nations, heavily dependent on tourism, have empty hotels and deserted tbeaches. The International Labour Organization estimates that 195 million jobs could be lost. Impact on the industry:

The automobile sector of Pakistan, which has already been on a downward trajectory since the beginning of current fiscal year, has received an additional shock from the coronavirus outbreak and is now on the brink of collapse. Prior to the outbreak of coronavirus, the rupee devaluation was the main reason behind the deteriorating situation of the auto sector as it turned auto parts and raw material expensive, thus raising the cost of production of car makers. Earlier, in the first eight months (Jul-Feb) of current fiscal year, automobile sales dived 44% to 90,834 units compared to 162,240 units in the same period of previous fiscal year. Following the directives given by the government to stop the spread of coronavirus, a majority of automobile manufacturing plants have halted production and have remained closed since March 23, 2020. In addition to that, a steep interest rate hike had also gravely impacted the automobile sector as car leasing became costlier, which discouraged people from purchasing vehicles. The State Bank of Pakistan (SBP) on Tuesday evening also reduced the key policy rate by 150 basis points to 11%, which is expected to support the auto industry but growing uncertainty makes it difficult to predict the outcome.

Impact on the company: In order to curtail the outbreak and to combat the effects of COVID-19 Pandemic, Atlas Honda has stopped its operations from March 24, 2020 including both factories regional offices and showrooms till further notice. The decision is in compliance with the directives issued by Provincial Governments to contain the spread of COVID-19 across provinces. Dealership owners usually experience brisk sales ahead of Eid every year as many people prefer to purchase new cars either by booking months ahead to get timely delivery before Eid or paying ‘heavy on money’ to buy on spot at showrooms. However, the pandemic has dried up the demand for cars.

Neither online booking is attracting buyers nor are customers visiting dealerships in larger numbers despite easing of lockdown,” Honda Atlas’s authorized showroom owner Shabbir Alibhai said on Thursday while adding that “workshop activities are gaining momentum which is understandable after two months of lockdown.”

Abiding by the standard operating procedures (SoPs), the dealerships are only calling some of their staff to work at offices and are refusing to accept vehicles for repairs in large numbers, he said. “We have been operating showrooms with less than half of the actual workforce since opening from Monday,” he said adding the overall activity at showrooms like fresh booking of cars, repair, maintenance, etc. is hardly 10 per cent of what it was before the pandemic. He said the management has so far not shown exit doors to any of its employees and salaries have not been cut. Meanwhile, some of the customers, who are booking vehicles are getting delivery time in August, he added. But Despite zero production and sales and plant closure for the last two months, the IMC and Honda Atlas Cars Limited raised car prices by Rs110,000-500,000 and Rs60,000-120,000. Assemblers made a clever move to raise prices ahead of budget FY21 as any duty and tax cut in the upcoming budget would force assemblers to bring down prices.

REFERENCES https://auto.hindustantimes.com/auto/news/how-crisis-struck-pakistani-auto-industry-facesmassive-threat-in-covid-19-times-41589005528837.html https://blog.siasat.pk/atlas-honda-pakistan-lists-new-prices/ https://mettisglobal.news/atlas-honda-closes-its-operations-offices-and-showrooms-to-containcovid-19-outbreak https://www.dawn.com/news/1557228...