Hero MotoCorp, the largest two-wheeler manufacturer in India, has reported 27% decline in net profit at Rs 440.58 crore in the July-September quarter as sales dropped on slowing demand and competition.
The two-wheeler market is India has witnessed adverse impact with the slowdown, rising fuel costs, coupled with high interest rates.
Hero’s sales, on the other hand have been impacted due to strong push by its previous partner Honda Motor Co, which has been trying to get a strong foothold in India, after it broke up with Hero, last year.
“Sensing the slowdown in the market, we led the way in adjusting our production plans in August and September, and this has been reflected in our quarterly sales figures,” Pawan Munjal, managing director and chief executive office, Hero MotoCorp, said in a statement.
Hero sold 13,32,805 units during the quarter under review, down 13.67% compared to 15,44,315 units during the corresponding period last fiscal year.
The company’s stocks dropped 1.9% on Bombay Stock Exchange (BSE) after the results announced, and was last traded at Rs 1795.95.
The company had reported its net profit at Rs 603.62 crore in the July-September quarter last financial year.
Hero’s net income during the July-September quarter stood at Rs 5,187.46 crore, down 10.96% as against Rs 5,826.15 crore in the corresponding period last year.
The company’s operating margin during the quarter was at 13.86%, down from 15.76% in the corresponding quarter last fiscal. During the previous quarter (April-June) it reported operating margin at 15%.
However, Munjal is hopeful that festive season would boost the company’s sales. “The onset of the festive season has been encouraging, with the retail sales of over two lakhs in the Navratras," he added.
The company hopes that its global business plans would take shape this fiscal. It plans to launch Hero products in new international markets including Nigeria, Kenya and Guatemala, Munjal said in a statement. It already exports to Sri Lanka and Nepal.
Pressure from competition was one of the major reasons, apart from slowdown, for the decline in Hero MotoCorp sales, said Arun Agarwal, auto analyst, Kotak Securities. Kotak Securites has put a “cautious” mark on the stock over the medium term. “The management expects the 2W industry to grow by 4-5% in FY13.
However, we remain cautious on the 2W industry given slowdown in the economy,” he added.
In September alone, sales of Hero MotoCorp dropped 26.35% at 404,787 units on y-o-y basis. It had sold 549,625 units in September 2011, Hero MotoCorp said in a previous statement.
Its domestic rival Bajaj Auto too had reported a 14% decline in overall sales in September at 360,152 units as against 417,686 units during the same month of previous year, according to a company statement.
Sales of Hero motorcycles with more than 125cc have fallen 37% this year (April-July) to 71,850 units against 114,323 units sold in the corresponding period last year. The company sells five models in this space, according to figures provided by the Society of Indian Automobile Manufacturers.
In August this year, total sales of seven Indian two-wheeler companies dropped, for the first time, since January 2009, at 1,195,534 units, a drop of 5.45% compared to 1,264,512 units sold in the same month a year ago, according to industry data.
Hero’s sales dropped more in August as its top-selling economy bike Splendor registered lower-than-expected retail sales. Bajaj Auto reported total sales at 304,352 units in August, a fall of 10% as against 338,054 units sold in the same month a year ago.
TVS Motors had witnessed a drop of 20% in August sales at 150,740 units compared with 190,184 units in the corresponding period.
