Hero posts third consecutive decline in net profit

Net profit for the quarter ended March fell 5% to Rs.574.23 crore from a year ago while sales remained at Rs.6,140 crore
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First Published: Fri, Apr 26 2013. 04 04 PM IST
This is the third quarterly profit drop in a row for Hero after it reported declines of 27% and 20% in the September and December quarters, respectively. Photo: Ramesh Pathania/Mint
This is the third quarterly profit drop in a row for Hero after it reported declines of 27% and 20% in the September and December quarters, respectively. Photo: Ramesh Pathania/Mint
Updated: Fri, Apr 26 2013. 08 48 PM IST
New Delhi: India’s largest two-wheeler maker, Hero MotoCorp Ltd, reported a third consecutive decline in quarterly net profit as the slowing economy left sales unchanged from a year earlier.
Net profit for the quarter ended March fell 5% to Rs.574.23 crore from a year ago while sales remained at Rs.6,140 crore. A Mint poll of analysts had estimated a 14% decline in profit to Rs.519 crore.
This is the third quarterly profit drop in a row for Hero after it reported declines of 27% and 20% in the September and December quarters, respectively.
Mumbai-based Emkay Global said the company reported better-than-expected results driven by the strong margin on earnings before interest, taxes, depreciation and amortization (Ebitda).
“Hero MotoCorp reported a good set of results led by lower input costs,” Emkay Global said to its investors in a note. “Ebitda margin for the quarter was ahead of estimate at 13.8%. Positive surprise was in raw material to sales, which declined 190 bps (basis points) QoQ (quarter-on-quarter) to 72.2%.”
Net profit for the year declined 11% to Rs.2,118.60 crore.
Hero’s chief executive and managing director Pawan Munjal said the weak macroeconomic sentiment and subdued consumer confidence led to the decline in profit.
“FY13 has been a rough year for the overall Indian auto sector,” Munjal said in a statement. “Considering the current environment, these are tough times for the auto sector in India and we remain cautiously optimistic about the growth prospects in the near term.”
The company declared its results after market hours on Friday. Its shares closed at Rs.1,596.95 apiece, down 1.42%, whereas the benchmark Sensex ended 0.62% lower at 19,286.72 points.
Sales of two-wheelers in the country slowed to 3% last fiscal year, after growing at 14% in previous years.
Stimulus measures following the global slowdown had pulled India’s economic growth up to 8.6% in 2009-10 and 9.3% in 2010-11 from a low of 6.7% in 2008-09. But gross domestic product growth fell to 6.2% in 2011-12 due to weak agricultural and industrial growth.
The Central Statistics Office’s February estimate pegged GDP growth in 2012-13 at 5%, the slowest in a decade.
Munjal said Hero will focus on improving demand through a series of activities it has planned for this year.
“Having sold over 60 lakh (6 million) two-wheelers in just 12 months, we have sustained our performance during the period. Being the industry leader, we have planned major initiatives to boost the industry sentiment and accelerate growth in the new financial year, mainly through new launches, campaigns, capacity addition and network expansion,” he said.
The rapid growth of erstwhile joint venture partner Honda Motor Co. Ltd has eroded Hero’s performance. While Hero lost at least three percentage points in market share in the last fiscal year, Honda Motorcycle and Scooter India Pvt. Ltd gained 6 percentage points to 18.64% to cement its place as the country’s second-biggest two-wheeler company, overtaking Bajaj Auto Ltd.
In an interview with Mint in March, Anil Dua, Hero’s senior vice-president, marketing and sales, said the company was consolidating and protecting market share was a primary concern.
“We wanted to focus on the topline and hold our volumes or else we would have put ourselves under long-term pressure,” said Dua. “Now the balancing act is over and topline is in our grip, we will get the bottomline right. We have started certain things two years back and the results of them will be coming in now.”
Company officials weren’t available for comments on Friday. Hero’s board recommended a dividend of Rs.60 per share for 2012-13.
Kirthi V. Rao in New Delhi contributed to this story .
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First Published: Fri, Apr 26 2013. 04 04 PM IST
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