Hinopak profit nearly halves despite sharp drop in finance cost.

Hinopak Motors Limited reported a sharp decline in profitability for the first quarter ended June 30, 2026, as top-line volume pressure outweighed significant savings in borrowing costs.

Profit after tax fell to Rs 209.69 million from Rs 416.82 million in the same period last year. Earnings per share (EPS) came in at Rs 8.45 compared with Rs 16.81 in the corresponding quarter.

Revenue and Gross Profit Contraction

Sales revenue decreased to Rs 3.28 billion from Rs 3.96 billion recorded in the previous year’s opening quarter. While the cost of sales also declined, the reduction was insufficient to safeguard gross margins.

Gross profit dropped to Rs 544.44 million from Rs 845.56 million. This compression in gross margin served as the primary driver behind the weaker overall quarter.

Finance Cost Relief

Finance costs fell substantially during the period to Rs 71.34 million from Rs 146.72 million a year earlier. The primary component remained mark-up on short-term borrowings, which stood at Rs 65.31 million.

Despite this interest relief, operating profit still declined significantly. Profit from operations stood at Rs 322.63 million against Rs 613.44 million in the prior period. After accounting for minimum tax liabilities and other operational items, profit before tax landed at Rs 208.57 million.

Cash Flow and Debt Deleveraging

In contrast to the P&L contraction, the company demonstrated strong cash generation. Cash generated from operations reached Rs 1.80 billion, reversing a negative operating cash flow of Rs 1.24 billion recorded in the same period last year.

Management utilized these cash inflows to aggressively reduce short-term borrowings:

• Short-Term Debt: Running finance and finance against trust receipts combined dropped to Rs 789 million, down sharply from Rs 2.53 billion as of March 31, 2026.

Commercial Outlook and Market Risks

Directors noted that while the broader commercial vehicle market is showing signs of gradual recovery—backed by moderating inflation and improving liquidity—management remains cautiously optimistic.

Key headwinds continue to include elevated energy prices, high local operational overheads, and ongoing geopolitical supply-chain uncertainties. The quarter highlights that while aggressive debt reduction and lower finance costs provided balance sheet relief, they were insufficient to offset the impact of weaker sales volumes and squeezed gross margins.