hondaaa pakistan

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Submitting To

Mr.Naveed Ahmad Mughal

Class

M.com & MSC (A&F)

Submission Date:

June 3, 2014

Group Member Names

Razia Batool 12124010 Tayyaba Ahsan 12124003 Mobeen Ashraf 12124002

Anam Sajjad 12109009



Honda Atlas Pakistan

Executive Summary:

In this report we have given a brief introduction of Honda Atlas Company and its Product. Then

we will analyze its three years financial statement by Operating and non Operating Assets,

Margin of its profits, Turnover ratios and analysis, Return on Investment of company, RI, EVA,

Analysis on Problems and its performance in last three years, Solution of its Problems,

Evaluation Charts and analysis report to company’s CEO.

For this purpose we took financial statements of Honda Atlas Company through Internet

medium. Then we gave brief introduction of company and its products. Description about

operating and non operating assets by analyzing financial statements of company

After taking data we find Margins, RI, ROI, EVA. Then we analyze the performance problems of

company.

We were able to perform these tasks by applying Performance Evaluation techniques.



Introduction

Project Title:

Performance Analysis of Honda Company.

Company Name:

Honda atlas Company Ltd. Pakistan



HONDA ATLAS COMPANY PAKISTAN

Vision Statement

Striving to be a company that society wants to exist by sharing joys with people throughout the

world creating products that maximize the joy of customers, with speed, affordability and low

CO2

COMPANY INTRODUCTION:

Atlas Honda Limited (AHL) is a joint venture between the Atlas Group and Honda Motor Co.

Ltd., Japan. The company was created by the merger of Panjdarya Limited and Atlas Autos Ltd.

in 1988. Both these motorcycle manufacturing concerns were established by the Atlas Group. In

addition, a third concern, Atlas Pak Ltd. was taken over by the Government of Bangladesh in

1971 after the fall of Dhaka. AHL manufactures and markets Honda motorcycles in collaboration

with Honda Motor Company. The Company also manufactures various hi-tech components in-

house in collaboration with leading parts manufacturers like Showa Atsumitech, Nippon Denso

and Toyo Denso. Honda motorcycles are by far the largest selling motorcycles in the country

with an unmatched reputation for high quality, reliability and after-sales-service.

AHL has undertaken to develop local manufacturing capabilities to the highest, economically

feasible level. While a major role in localization has been assigned to vendor industries, Atlas

has the country’s largest in-house manufacturing capability at its Karachi and Sheikhupura

plants. To support the production facilities, the company has established an R&D wing and tool

making facilities through CAD/CAM which are growing rapidly in size and function as the

company expands. Atlas has managed to execute 12 Joint Venture/Technical Assistance ween

local vendors and foreign manufacturers for transfer of technology. Besides, Atlas has directly

executed 9 Joint Venture/Technical Assistance Agreements other than Honda.

AHL management is striving to modernize company operations by adapting applicable aspects of

research and theory and more specifically, Honda’s unique philosophy of hard/soft technologies

to the realities of Pakistani conditions. Company management structure, systems and processes



are changed according to the demands of the customer, growth and new technology. Efforts are

being made to develop participation at all levels of personnel in decision-making and a

substantial and effective delegation has been established at levels where applicable. Various

participation programs such as Ala Mayar Quality Circles movement, launched in 1985, are

strongly encouraged to allow constructive self-expression and teamwork. The Company training

and development programs encourage all members to develop themselves and contribute to their

full potential.

AHL is playing a pioneering role in creating conditions for easy and confident use of

motorcycles all over the country. A vast and growing network of over 1600 sales service and

spare parts dealers has been established. In order to back up this system, Atlas has set up

Warranty & Training Centers (WTC) in Karachi and Lahore which provide several courses ofvarying duration and complexity for motorcycle mechanics and users each year. Mobile training

facilities take the latest know-how, technology and maintenance of motorcycles to major rural

and urban centers around the country.

Annual Production Capacity

750,000

Authorized Capital



1.5 Billion (rupees)

Paid Up Capital

Rs. 1,034.066 Million

Export

Bangladesh

Membership of Industry & Associations

Pakistan Automotive Manufacturers Association.

Marketing Association of Pakistan.

Management Association of Pakistan.

Lahore Chamber of Commerce & Industry.

Sheikhupura Chamber of Commerce & Industry.

Overseas Chamber of Commerce & Industry.

Karachi Chamber of Commerce & Industry.

Product Introduction:

Brands

In Pakistani motorcycle industry Honda is a leader. Although there are 50 brands of bike are

available yet many of them have not got recognition among the people.

All these exist in different segments of markets.

Yamaha

It is a basically two stroke 100 CC motorcycle. It is very popular in villages because people consider

it more durable and a smooth driving bike on rough roads. It is second largest selling brand of

Pakistan.



Sohrab

It is first Pakistani brand that was introduced. First time it introduced heavy bike look in a four stroke

and 70 CC motorcycle. Its price is low as compare to Honda but. It is not direct threat for Honda. But

to some extent people like it because it is rapidly increasing its quality, after sales services and resale

value. It is getting popularity in villages.

Suzuki

It is third selling brand in Pakistan and it also targets the villagers. Its image is also approximately

same as Yamaha in the mind of people and it also targets the village are



Operating & Non Operating Assets:

Operating Assets:

Operating assets are long‐lived assets that are used in normal business operations. They are not

held for resale to customers. Investments in operating assets are essential to the success of most

businesses. There are three major categories of operating assets: property, plant, and equipment,

sometimes referred to as plant assets or fixed assets; natural resources; and intangible assets.

Property, plant, and equipment includes land; land improvements, such as driveways, parking

lots, fences, and similar items that require periodic repair and replacement; buildings; equipment;

vehicles; and furniture. Natural resources, such as timber, fossil fuels, and mineral deposits, are

created by natural processes that may take thousands or even millions of years to complete.

Companies use up natural resources by cutting or extracting them, so natural resources are

sometimes called wasting assets. Intangible assets, which lack physical substance, may

nevertheless provide substantial value to a company. Patents, copyrights, and trademarks are

examples of intangible assets.



Calculations of operating assets

2014

2013

2012

Cash and bank 2354150

Stock in trade 3852540

Property plant and equipment 0

Trade debt 2873067

Stores and spare 116205

TOTAL 919596

Cash and bank 3534967


Property plant and equipment

Trade debt 3355778


TOTAL 11317943



NON OPERATING ASSETS

2014

Cash and bank 82477


Property plant and equipment

Trade debt 3255755


TOTAL 6303894

Short term investments 0

Loans, advances, prepaymentsand other receivables

0

Deferred taxation 393238

Long term deposits 4042

Long term loans and advances 52772

Capital work-in-progress 81293

Intangible assets 86431

Total non operating assets 617776



2013

2012


Loans, advances, prepayments

and other receivables

0








Loans, advances, prepaymentsand other receivables

0









Performance Measures

Performance measures are used to determine the profitability of a particular company and

compare the results for the different years with the overall industry.

Kinds of Performance Measures

There are three kinds/types of measures used to analyze the profitability of the company.

Residual Income

Economic Margin

Turnover

Return on Investment

Value Added

Operating Profit / Loss:

The amount of profit realized from a business's operations after taking out operating expenses -

such as cost of goods sold (COGS) or wages - and depreciation. Operating income takes the

gross income (revenue minus COGS) and subtracts other operating expenses and then removes

depreciation. These operating expenses are costs which are incurred from operating activities and

include things such as office supplies and heat and power. Operating Income is typically a

synonym for earnings before interest and taxes (EBIT) and is also commonly referred to as

"operating profit" or "recurring profit."

Calculated as:

Operating Income = Gross Income - Operating Expenses - Depreciation & Amortization



Margin:Margin = Net operating income / Loss ÷ Sales

2014 2013 2012

Net operating Income/Loss 2,135,321 715,784 (346,878)

Sale 39,153,254 30,274,604 16,599,608

Margin 5.45% 2.37% 2.08% (loss)

Turnover

Turnover = Sales ÷ Average operating assets

2014 2013 2012

Sale 39,153,254 30,274,604 16,599,608

Net operating Assets 9195962 11317943 6303894

Turnover 4.257 2.62 2.63



Return on Investment:

ROI = Net operating income ÷ Net operating Assets*100

2014 2013 2012

Net operating Income/Loss 2,135,321 715,784 (346,878)


Return on investment 23.22% 6.32% 5.50%

Residual Income:

RI = Net operating income – (Net operating Assets * minimum rate of return)

2014 2013 2012

Net operating Income/Loss2,135,321 715,784 (346,878)


Rate of return(KIBOR rate) 11.04% 12.06% 13.5%

Residual Income 1120086 (649154) (1197903.69)



Economic Value Added

EAV= After tax net profit - (WACC*(total assets-current liabilities)

Wacc

Wacc = wdrd (1-tax ) + wers

2012 2013 2014

13.5% 11% 11%

Economic Value Added A measure of a company's financial performance based on the residual wealth calculated by

deducting cost of capital from its operating profit (adjusted for taxes on a cash basis). ( Also

referred to as "economic profit".)

The formula for EVA is:

EVA = Net Operating Profit After Tax - (Capital Invested x WACC)

Calculation of EVA

http://www.investinganswers.com/financial-dictionary/financial-statement-analysis/operating-profit-2796

http://www.investinganswers.com/financial-dictionary/economics/capital-5749

http://www.investinganswers.com/financial-dictionary/stock-market/x-6392

http://www.investinganswers.com/financial-dictionary/financial-statement-analysis/weighted-average-cost-capital-wacc-2905

http://www.investinganswers.com/financial-dictionary/financial-statement-analysis/weighted-average-cost-capital-wacc-2905

http://www.investinganswers.com/financial-dictionary/stock-market/x-6392

http://www.investinganswers.com/financial-dictionary/economics/capital-5749

http://www.investinganswers.com/financial-dictionary/financial-statement-analysis/operating-profit-2796



After tax net profit - (WACC*(total assets-current liabilities)

2012 2013 2014

EBAIT (532,213) 244,287 1,073,670

Less Capitalinvested *wacc

(132417.85) (154803) (269208.94)

EVA Nothing 89484 804461.06

In 2012 there is no economic value added because in this year company was going in loss there

net profit after interest and tax is negative so we can say no value added in year 2012 because of

negative net profit.

In year 2013 company has earned net profit of $244287 and its total capital cost * wacc is =

$154803 after deducting this value from net profit after interest and tax remaining value =$89484 which is economic value added. Same way in year 2014 economic value added is

$804461.06.we can say year 2014 is best for the view point of economic value addition.

hondaaa pakistan

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