Hero Honda Motors Ltd, India’s biggest motorcycle maker, posted a better than expected 53% gain in fourth-quarter profit after it cut costs.
NEW DELHI: Hero Honda Motors Ltd, India’s biggest motorcycle maker, posted a better than expected 53% gain in fourth-quarter profit after it cut costs and sold more expensive models.
Net profit rose to Rs 299 crore ($74 million), or Rs 14.96 a share, in the three months ended March 31 from Rs 195 crore, or Rs 9.76 rupees, a year earlier, the New Delhi- based company said in a release on Thursday. That beat the Rs 254 crore median estimate in a Bloomberg survey of 11 analysts. Sales rose 5.6% to Rs 2,789 crore.
Hero Honda has cut back on advertisements and almost halved sales incentives to retain profitability, Ravi Sud, the company’s CFO, said on Thursday. The company needs to maintain its efforts as higher interest rates crimp demand for two-wheelers in the world’s biggest motorcycle market after China.
“Our cost reductions have really worked and that’s adding to the bottomline,” Sud said in a phone interview after earnings were announced. “We are cautious going forward as material costs are increasing significantly and there are no signs of interest rates cooling off.”
Central bank has increased its key policy rate nine times since October 2004, pushing up loan rates in a country where most motorcycles are bought on credit. — Bloombergearnings were announced. “We are cautious going forward as material costs are increasing significantly and there are no signs of interest rates cooling off.”
Central bank has increased its key policy rate nine times since October 2004, pushing up loan rates in a country where most motorcycles are bought on credit.
Hot-rolled coil steel, a global benchmark, will average 14% more than previously expected this year because producers will be able to charge more to cover costlier raw materials, Citigroup Inc said this month.
The company’s spending on raw materials rose 3.1% to Rs 1,980 crore in the last quarter, the company said. Spending on sales incentives declined 44% to Rs 65 crore last year while advertisement spending declined 8.3% to Rs 221 crore, Sud said.
That helped boost operating profit expressed as a percentage of sales to 14.77% in the last quarter compared with 10.18% a year earlier, Sud said.
Hero Honda will pay a dividend of Rs 19 a share, raising it from Rs 17 a year earlier.
Sales of two-wheelers rose to 884,075 from 855,984, the company said. The maker of Splendor, Karizma and CBZ X-Treme cut back on cash and other discount offers during the quarter.
Hero Honda expects sales to increase by as much as 6% this year from 3.34 million motorcycles and scooters sold last year, Sud said. Sales were unchanged in the year ended March 31.
Income from businesses other than manufacturing rose 24% in the last quarter to Rs 55.14 crore. The company opened a new factory in Haridwar in northern India this month. It will maximise output at the new plant and get 60% of components supplied from near the factory, managing director Pawan Kant Munjal said on April 8. The plant is entitled to excise and income tax rebates for 10 years.
Hero Honda has increased prices by as much as Rs 1,000 per motorcycle because of rising raw-material costs, the company said April 21.
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