Hero Honda Q1 profit up 44% on higher sales

CORPORATE SCORECARD

Bolstered by impressive sales, especially in the 125cc motorcycle (where margins are better than the low-end 100cc segment), the country’s largest motorcycle manufacturer Hero Honda posted a 44 per cent rise in profit after tax (PAT) for the quarter ended June 30, 2008.

While net profit stood at Rs 272.87 crore for the quarter, revenues grew by 16 per cent to Rs 2,843.53 crore.

While two-wheeler industry grew by eight per cent during the quarter ended June, Hero Honda sold 894,000 motorcycles, a rise of 11 per cent , during the period. However, the company’s market share hit by 55 per cent.

According to the company, which derives much of its sales from the low-margin 100 cc motorcycle segment, motorcycle brands such 125 cc Splendor series, 150 cc and above brands like Passion Plus, Hunk, CBZ X-treme and Karizma in the premium segment have done exceptionally well. In the scooter segment, Hero Honda Pleasure alone sold 10,000 units in June.

“We had a well beginning this year with the opening of our new plant at Haridwar in April. This will augment our installed capacity. This is a significant step towards our future growth.” said Brijmohan Lall, chairman, Hero Honda Motors. With the commissioning of the Haridwar plant, Hero Honda’s total installed production capacity stood at 4.4 million units per year.

The company is aggressively targeting new segments of customers from rural areas to sell its motorcycles owing to rising interest rates. “The hike in the repo rate by 50 bps will only increase the rate of interest for two-wheelers financing.

We help our customers obtain financing through our mix of empanelled banks and local tie-ups with financiers,” said Anil Dua, senior vice-president, sales & marketing, Hero Honda.