Automobiles Assemblers: HONDA ATLAS CARS (PAKISTAN) LIMITED - Year Ended March 31, 2005
Honda Atlas Cars (Pakistan) Limited (Honda Atlas) was incorporated on November 4, 1992 and is listed on the Karachi, Islamabad and Lahore Stock Exchanges. Its principal activities are the assembly and progressive manufacture and sale of Honda vehicles and spare parts.
Honda Atlas is a joint venture between Honda Motor Company Limited, Japan and the Atlas Group of Companies, Pakistan. Construction of the factory started on April 17, 1993 and the first car rolled off the assembly line on May 26, 1994. Official inauguration was done by the President of Pakistan and the President of Honda Motor Company Limited, Japan was also present.
M/s Honda Motor Company Limited, Japan is the holding company of Honda Atlas with 51% shares. Atlas Group is the local partner and have significant holding. Total number of shareholders of Honda Atlas is 3,362 of which individuals are 3,270 which hold 37% of the total shares. The rest of the shares are held by different companies and financial institutions.
The production of cars has witnessed fast increase in the recent years. Total production of cars in the country for 2005 has been 116,762 units (2004: 88,881 units), of which 1300 cc & above cars were 48,451 units (2004: 35,792 units). Honda Atlas during 2005 produced 20,040 units (2004: 11,586 units) and on this basis its market share works out to 48.4 % (2004: 36.6 %). To meet the increasing demand, Honda Atlas has added new production facilities and introduced second shift and now its installed capacity is 30,000 units.
Honda Atlas is said to be committed to meet customer expectations and providing them good value for money. Currently, it is offering eight different models of Honda CIVIC and CITY cars in wide range of colours with unique technological and other features. The number of employees of the company at year end March 31, 2005 was 1,032(2004: 625).
Honda Atlas recalls that on July 14, 1994, it started car bookings at six dealerships in Karachi, Lahore, and Islamabad. Now the dealership network comprises sixteen 3-S dealerships in 10 major cities of Pakistan and almost 77,500 cars have been sold till March 2005. Besides, it is also maintaining network of thirty 2-S dealerships to provide efficient after sale service to the Honda customers. All dealerships are constructed in accordance with the standards defined by Honda world over. It is said that the local vendors are continuously patronised to develop local industry and that the quality of local parts is thoroughly checked to meet stringent international standards.
The related parties of Honda Atlas comprise holding company, fellow subsidiaries, associated undertakings and key management personnel. The company carried out transactions with various related parties. Significant transactions with related parties for the year ended March 31, 2005 comprise: Purchase of goods (Rs 9,176 million);
Purchase of property, plant and equipment (Rs 63 million); Purchase of intangible assets (Rs 2million); Sale of goods (Rs 24 million); Long term investments (Rs 229 million), Insurance premium (Rs 147 million); Royalty (Rs 272 million); and Technical assistance fee (Rs 17 million). Related party transactions are said to be made at prices considered equivalent to prices that would prevail in arms length transactions.
Honda Atlas witnessed 68 % increase in total assets from Rs 6,999 million as on March 31, 2004 to Rs 11,793 million as on March 31, 2005. This increase partly reflects the lining up of materials/resources for increased production of cars to 20,040 units in 2005 as against 11,586 units produced in 2004. Sales of cars during 2005 and 2004 were 20,056 units and 11,750 units respectively. Due to increased demand for cars, advances from customers have almost doubled. The company is flush with cash which is nearly 50 % of total assets. There are no long term debts. The company enjoys satisfactory financial position. Honda Atlas has to find better venues of deployment of the cash mountain.
Net sales of the company for the year ended March 31, 2005 rose to record Rs 16,587 million, an increase of 77 % over sales at Rs 9,358 for the previous year. This was largely due to production and sale of more car units during the period under review. During 2005, Honda Atlas sold 20,056 car units as against 11,750 car units during the previous year. This happened in line with the increased demand for Honda and other makes of cars in the country. However, the increase in net sales did not translate into similar increase in profit margins largely due to more than proportionate increase in the cost of goods sold. During 2004, cost of goods sold as % of net sales was 92 % whereas for 2005 cost of goods sold rose to as high as 98 % of net sales. Despite substantial other income, the company closed the year with return on equity at 8 % as against 19 % for the previous year. Honda Atlas may have to reassess the cost of different inputs for production of cars. Performance statistics are enclosed.
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Performance Statistics (Million Rupees)
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Balance sheet -As At-
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March 31 June 30
2005 2004
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Share Capital-Paid-up: 420 420
Reserves: 1,579 1,512
Un-appropriated Profit: 95 179
Equity-Basic: 2,094 2,111
Surplus on Revaluation of Assets: 0 0
Total Equity: 2,094 2,111
Non-Current Liabilities: 0 0
Capitalisation: 2,094 2,111
Current Liabilities: 9,699 4,888
Total Liabilities and Equity: 11,793 6,999
Tangible Fixed Assets: 694 600
LT Investments and Deposits: 812 70
Stock-in-Trade: 3,159 1,709
Trade Debts: 0 0
Current Assets: 10,287 6,329
Total Assets: 11,793 6,999
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Ratios:
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Current Ratio: 1.06 1.29
Debt-Equity Ratio: 0 No debt
Book Val./share - Rs: 49.86 50.26
Quoted Share Price- (27-6-05)- Rs: 56.00 -
Price/Book Value Ratio: 1.12 -
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Profit & Loss A/c for Nine Months Ended
March 31 2005 2004
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Net Sales: 16,587 9,358
Gross Profit: 283 756
Operating Profit: 83 595
Profit Before Taxation: 258 620
Profit After Taxation: 162 408
Cash Dividends Declared %: 22.5% 42.5%
Dividend - Amount Actually Paid Out: 178 146
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Ratios:
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Gross Profit to Sales: 2% 8%
Operating Profit to Sales: 1% 6%
Profit After Tax to Sales: 1% 4%
Net Profit to Equity - %: 8% 19%
ROA: 1% 6%
ROCE: 8% 19%
Dividend Payout Ratio (resp. years): 44% 42%
Earnings Per Share (Rs): 3.86 9.71
Inventory Turnover (Times): 5.25 5.48
Price/Earning Ratio: 14.52 -
Asset Turnover (Times): 1.41 1.34
Days Inventory: 70 67
Capacity (No of Motor Vehicles)*: 17,500 11,880
Actual Production (No of MVs): 20,040 11,586
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COMPANY INFORMATION: *At year end, production capacity is 30,000 motor vehicles due to enhancement of production facilities, with all divisions working on double shift basis.
Yusuf H. Shirazi; President/CEO: Mamoru Suwama; Director: Toshitsugu Kaneko; Company Secretary: Raffat Iqbal; Chief Financial Officer: Asad Murad; Auditors: M/s A.F. Ferguson & Co, Chartered Accountants; Legal Advisors: Cornelius, Lane & Mufti; Registered Office: 1- Mcleod Road, Lahore; Factory: 43 Km, Multan Road, Manga Mandi, Lahore; Web Address: www.honda.com.pk
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