Weak operational performance saw the country’s largest two-wheeler manufacturer Hero MotoCorp register a 3.4 per cent year-on-year decline in its net profit at Rs 976.28 crore during the July-September quarter, but it was ahead of Bloomberg consensus estimates which had pegged the profit at Rs 941 crore. However, revenue from operations grew 8.6 per cent to Rs 9,090.94 crore — again ahead of estimates — on the back of volume growth.
The company sold 21.34 lakh units in the September quarter, 5.5 per cent higher over the 20.23 lakh units sold a year ago.
Operational numbers were down for the quarter due to higher depreciation cost, up 11.6 per cent y-o-y, other expenses, up 18.7 per cent and raw material cost, up 13.6 per cent. Ebitda (earnings before interest, tax, depreciation and amortisation) fell by 5.3 per cent to Rs 1,378.7 crore — below estimates — and margin contracted by 222 basis points to 15.2 per cent y-o-y due to higher commodity cost.
“Hero MotoCorp, backed by sustained demand for its popular range of motorcycles and scooters, continued its sales growth in Q2FY19 compared to the corresponding quarter in the previous fiscal,” Pawan Munjal, chairman and managing director, said. He further added that Hero expects to carry the momentum forward during the rest of the year, and navigate through the cost challenges to deliver profitable and sustained growth.
According to analysts at Jefferies, after four quarters of double-digit volume growth, Q2 has been relatively weak for Hero due to gross margin pressures, weaker operating leverage and expiry of tax benefits at its Haridwar plant.—FE