 "Hero MotoCorp: Higher costs hit profits")
While its volume performance was robust and reflected on the higher revenues in the June quarter, a sharper rise in costs dented Hero MotoCorp’s performance with net profit of Rs 562.8 crore coming below expectations of Rs 618 crore. Riding on a 10 per cent growth in volumes, favourable product mix and a price increase in March, the company posted a 14.24 per cent year-on-year increase in revenues to Rs 7,036 crore. This, however, was largely in line with estimates of Rs 7,049 crore. Realisations were up about four per cent in the quarter as compared to the year-ago period.
Despite strong sales riding on the new launches -- Splendor i-smart, Karizma R, Karizma ZMR and Xtreme -- and higher revenues, operating profit growth came in at only 3.5 per cent, while margins fell 138 basis points to 13.4 per cent. Raw material costs, which account for 72 per cent of sales, were up 15 per cent year-on-year, about 30 basis points higher than the previous year. The management explained that the excise duty anomaly between inputs and final product at the tax-free Haridwar plant impacted profits to the tune of Rs 90 crore. Post the Budget in February, excise duty on inputs is pegged at 10-12 per cent, while that on final product is eight per cent. About 40 per cent of the volumes come from that plant.
The company is also confident of double-digit volume growth in the current year. It expects volumes to perk up as the festival season starts on September 25 and believes that the new launches will help it sustain its volume growth.
The stock, which has gained over seven per cent in the past fortnight, could see some reaction on Wednesday.
Despite strong sales riding on the new launches -- Splendor i-smart, Karizma R, Karizma ZMR and Xtreme -- and higher revenues, operating profit growth came in at only 3.5 per cent, while margins fell 138 basis points to 13.4 per cent. Raw material costs, which account for 72 per cent of sales, were up 15 per cent year-on-year, about 30 basis points higher than the previous year. The management explained that the excise duty anomaly between inputs and final product at the tax-free Haridwar plant impacted profits to the tune of Rs 90 crore. Post the Budget in February, excise duty on inputs is pegged at 10-12 per cent, while that on final product is eight per cent. About 40 per cent of the volumes come from that plant.
The company is also confident of double-digit volume growth in the current year. It expects volumes to perk up as the festival season starts on September 25 and believes that the new launches will help it sustain its volume growth.
The stock, which has gained over seven per cent in the past fortnight, could see some reaction on Wednesday.