New Delhi: Hero MotoCorp Ltd, India’s largest two-wheeler maker, has reported a 3.38% year-on-year decline in net profit to 976.28 crore during the September quarter (Q2) due to higher raw material costs and other expenses amid subdued demand in key markets of Kerala and West Bengal.

The company, though, beat the Bloomberg analyst estimates of net profit of 941 crore, thanks to sustained demand for its motorcycles in rural markets. In the corresponding period last fiscal, the company reported a net profit if 1,010.49 crore.

Hero MotoCorp witnessed 5.4% y-o-y increase in two-wheeler sales to 2,134,051 units during Q2 due to reduced sales in West Bengal after that state’s government made it mandatory to have a driving licence to buy a two-wheeler. Sales in Kerala took a hit due to the floods. Recovery in rural markets in the rest of the country offset the sales slump, thanks to yet another year of normal monsoon.

Revenue, or net sales, during Q2 increased by 8.5% y-o-y to 9,090.94 crore.

As a consequence of increasing oil and other commodity prices like steel, Hero MotoCorp’s raw material expenses for the September quarter rose 13.6% to 6,403.8 crore. Other expenses went up 18.6% to 978.4 crore due to higher advertisement costs. A depreciating rupee that made imports of certain materials expensive did not help either.

Consequently, Earnings before Interest, Tax, Depreciation and Amortization (Ebitda), a measure of operating profit of a company, declined 5.2% y-o-y to 1,378.7 crore while operating margins contracted 220 basis points to 15.2%. One hundred basis points make up one percentage point.

“I’m pleased to share that Hero MotoCorp, backed by sustained demand for its popular range of motorcycles and scooters, continued its sales growth in Q2FY19 compared to the corresponding quarter in the previous fiscal. Marking the company’s re-entry into the premium motorcycle segment, we launched the Xtreme 200R in the second quarter. With the upcoming festive season, the new offering will help us consolidate our market leadership," said Pawan Munjal, chairman and managing director of Hero MotoCorp, in a statement.

On Tuesday, Hero MotoCorp shares rose 0.53%, or 15.40, to 2,898.70 on the BSE while the benchmark Sensex gained 0.85%, or 297.38 points, to end the day at 35,162.48. Hero MotoCorp announced its Q2 results after market hours.

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