Hero Honda profit up 8% to Rs 204 cr

Hero Honda Motors Ltd today announced a net profit of Rs 204.45 crore for the quarter ended June 30, 2005 compared with Rs 190.07 crore for the quarter ended June 30, 2004, a growth of 7.56 per cent.

The turnover (net of excise) has increased to Rs 2007.63 crore for the quarter ended June 30, 2005 from Rs 1745.21 crore in the corresponding quarter of the previous financial year, an increase of 15 per cent.

Pawan Munjal, managing director, said the company's latest offering, the 125 cc Glamour, now available in southern states, would be launched in other markets too in the coming months.

"Super Splendor, which was launched in March this year has also received a very encouraging response from our customers. In the first four months of it's launch the company has already sold 150,418 units", he added.

A release from Hero Honda added that Takao Eguchi joined as an additional director and whole-time director with effect from June 01, 2005 in place of Shinichi Nakayama, who relinquished his office on May 30, 2005.

Motohide Sudo joined as an additional director with effect from June 23, 2005 in place of Koji Nakazono, who relinquished his office on June 23, 2005.

Reuters adds: "The bottom line has taken a hit and operating margin has dipped despite price increases because of high cost of raw materials and advertising and sales expenses," said Dipen Sanghvi, an analyst at Pranav Securities.

"Margins will continue to remain under pressure on raw material costs and increasing competition in the space which will prevent price increases, so the company will need to focus on growing volumes and cutting costs," he said.

But shares in Hero Honda, valued at more than $2.8 billion, rose 3.8 percent to Rs 652 in a firm Bombay market.The stock rose 5 percent in April-June, underperforming a near-10-percent gain in the sector index and a 10.8 percent rise on the main Bombay index.

Hero Honda, known for its sturdy, fuel-efficient Splendor bikes, has driven a motorcycle boom in the $4 billion Indian bike market, helped by cheap loans, rising incomes, new models and a shift in consumer preference to motorbikes from scooters.

But rivals are launching new models at comparable prices to dent Hero Honda's dominance of a market of nearly 5 million bikes a year, second only in size to China's.

Firms have been squeezed by higher prices for steel, rubber and plastics, while a cutthroat market has seen more money go on advertising and discounts.

Most manufacturers, including Hero Honda, raised prices by 1-3 percent from April, following increases in steel prices.

But manufacturers should benefit as steel prices soften, and higher car prices, on the back of new anti-pollution rules, may deter some bike riders from switching to cars.

Bike makers are betting on continued sales growth as more than half of India's billion-plus population is below the age of 25. But their margins may remain under pressure, analysts said.