Strong sales power Hero Honda Q1 net up over 13% yoy

Moneycontrol Bureau

Hero Honda Motors ' first quarter net profit rose 13.5% from a year ago to Rs 557.89 crore, boosted by strong growth in sales volumes. Revenue of India’s largest two-wheeler maker accelerated 32% year-on-year to Rs 5,683.33 crore.

Hero Honda’s sales volumes were up 24% in April-June. It sold 15.3 lakh two-wheelers in three-month period, highest sales for any quarter.

The results were almost in-line with analysts estimates. A CNBC-TV18 poll had expected net profit at Rs 543 crore on revenue of Rs 5,660 crore.

Hero Honda shares rose over 1.7% at Rs 1,786.90 on NSE in afternoon trade after the company saw profits rise after four quarters of decline.

Hero Honda said it sold over five lakh two-wheelers in each month of the first quarter, thus demonstrating its sustained top-line performance and further strengthening its market leadership.

"Our Q1 performance has set the outlook for coming quarters, and we are confident of achieving our initial guidance for FY12 to sell over six million units," said managing director and chief executive officer Pawan Munjal.

This strong growth in sales helped offset pressure from rising commodity costs and a surge in depreciation costs. Hero Honda’s raw material costs surged 37.5% year-on-year to over Rs 4,241 crore in the quarter. Depreciation costs in the first quarter were up almost five fold to Rs 239.8 crore.

Munjal said the company’s strategic initiatives of developing new brand identity post breakup with Japan’s Honda Motor, exploring international opportunities, enhancing research and development capabilities and finalizing its fourth plant were pacing ahead.

However, the thrust presently was to maintain operational excellence amid volatile cost of commodities like steel, aluminium and rubber, he added.

Last December, the Hero Group and Honda had agreed to end their 26-year-old joint venture, with the Indian partner agreeing to buy out Honda’s 26% stake in Hero Honda.

Munjal said Hero Honda will now explore markets to grow around the world, especially in Latin America, Africa and South East Asia.

It also plans to "aggressively" expand distribution network in India and will cross 5,000 customer touch points by end of this year.

Nachiket Kelkar
nachiket.kelkar@network18online.com

Article source- MONEY CONTROL

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