The country’s largest two-wheeler maker Hero MotoCorp on Thursday reported a decline of 20 per cent in net profit for the third quarter ended December 31 at Rs 488 crore on slow sales and higher expenses.
The company had posted a net profit of Rs 613 crore in the corresponding period last financial year.
Net profit was impacted by low sales which dipped marginally to 1,573,135 units during the quarter compared with 1,589,286 units sold in Q3 FY12. Pawan Munjal, managing director and chief executive, Hero MotoCorp, said: "The last two quarters have been challenging for the Indian automobile industry due to delayed monsoons, rising fuel prices and subdued sentiments."
Income from operations rose marginally in the October-December period by 2.6 per cent to Rs 6,187.6 crore against Rs 6,031.4 crore in the same period last year. Net sales in the period stood at Rs 6,151.3 crore against Rs 5,983.5 crore in the year-ago period.
However, earnings were impacted by higher raw material costs and ‘other expenses’ due to advertising spends and expenditure on brand-building initiatives. During the third quarter, ‘other expenses’ increased a sharp 25 per cent to Rs 625.3 crore against Rs 498.68 crore in the corresponding period last year.
Earnings before interest, tax, depreciation and amortisation margin dropped sharply to 12.6 per cent in the October-December quarter against 15.6 per cent in the corresponding quarter last year.
Munjal informed the company had recorded strong growth during the festive season, with sales of over 1.1 million two-wheelers during October and November. “Our despatches were consistently over 500,000 every month this quarter. This trend may be an early sign of recovery and we hope the domestic two-wheeler industry will revert to higher growth rates in near future. Whenever that happens, we will be geared up to meet the upsurge in demand," added Munjal.
Shares of Hero MotoCorp were trading at Rs 1818.5 apiece, down 0.92 per cent from the previous close on the Bombay Stock Exchange.
