Hero Honda profits exceed expectations

Hero Honda profits exceed expectations
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First Published: Thu, Jan 31 2008. 11 30 PM IST
Updated: Thu, Jan 31 2008. 11 30 PM IST
New Delhi: India’s largest two-wheeler maker, Hero Honda Motors Ltd, has reported a 32% increase in net profit for the quarter to December, beating market expectations mainly after it reined in costs and introduced more products.
The company reported a net profit of Rs275 crore for the three months ended December, against Rs209 crore in the year-ago period. Turnover rose marginally, by 4%, to Rs2,795 crore in the same period.
“Our new products and refreshes helped give a pull for people to come to the showrooms,” said Pawan Munjal, managing director and chief executive officer, Hero Honda.
In the quarter, the company offered rebates on only one model and cut overall marketing spend, he said. Munjal also said he was able to “rationalize buying of raw materials and other marketing costs,” but did not give details.
Ashutosh Goel, an analyst with Edelweiss Capital, said Ebitda (earnings before interest tax depreciation and amortization) increased by more than 2 percentage points to 13.9% in the quarter from a year ago. So the firm earned Rs2 more as profit for every Rs100 it earned as revenue.
After years of double-digit growth rates, sales in the world’s second largest two-wheeler market fell 7.7% in the first nine months of this fiscal to 5.47 million units as lenders and financiers stayed away due to high delinquency rates. About 60% of two-wheelers are bought on credit in India. Still, Hero Honda was the only two-wheeler maker that managed to keep sales up.
Rivals Bajaj Auto Ltd and TVS Motor Co. Ltd have suffered a sales decline and seen their profits dip by double digit percentages as a result of the slowing sales.
Shares of Hero Honda on the Bombay Stock Exchange fell by 1.27% to Rs676.95.
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First Published: Thu, Jan 31 2008. 11 30 PM IST