Hero MotoCorp Q4 profits dip 5% as rivals eat into share

Written by feBureau | New Delhi | Updated: Apr 27 2013, 07:31am hrs
Hero MotoCorps profits on Friday slipped for the third consecutive quarter, amid rising competition and a sluggish demand for motorcycles, where it has a leading 53% market share. While Heros net profits for the fourth quarter ended March dropped 4.86% at R574.23 crore, it beat Street estimates, which predicted an even lower R500 crore profit.

MD and CEO Pawan Munjal said, FY13 has been a rough year. Weak macroeconomic sentiment coupled with subdued consumer confidence adversely impacted the industrial growth and sales volumes. We remain cautiously optimistic about the growth prospects in the near term.

Net sales in Q4 rose 1.84% at R5,962.54 crore, even as volumes for the two-wheeler maker fell 2.8% at 15.27 lakh units. Ebitda margin in Q4 stood at 13.83%, lower than margins of 15.33% recorded in the same quarter last fiscal.

For the full-year FY13, net profits fell almost 11% at R2,118.16 crore while net sales were up by 0.9% at R23,582.74 crore. Ebitda margin for FY13 stood at 13.82%, lower than margins of 15.35% of FY12.

To boost margins, Hero hiked prices of its products on Friday by R500-1,500, while announcing a warranty of five years on all its two-wheelers to push sales. Sluggish sales and inventory build-up has forced the company to lower production several times this year, but after a flat year for motorcycle sales, volume are expected to grow 6-8% in FY14, according to industry body Siam.

Hero MotoCorp, which split from Japanese partner Honda in 2011, is investing around R2,500 crore in R&D and fresh production capacity it hopes to sells 10 million units annually by 2020, 1 million of which will be in new export markets in Africa and Latin America.