market leader Hero Honda has reported disappointing results
for the quarter ended 30th June 2006. The results are
below market expectations as operating margins were impacted
by rising costs. The company has been steadily losing
market share to its closest competitor, Bajaj Auto, for
the last couple of years.
profits for the quarter increased 16.28 per cent to Rs237.74
crore from Rs204.45 crore for the same quarter of previous
year. Net sales increased by 19.59 per cent to Rs2,364.37
crore. Total revenues went up by 20.37 per cent to Rs2,416.65
crore from Rs2,007.63 crore.
profits for the quarter were higher by 9.13 per cent but
operating margins as a percentage of net sales declined
to 13.49 per cent from 14.78 per cent for the previous
costs increased 21.26 per cent during the quarter while
staff costs were higher by 22.28 per cent. Other operating
expenses increased by 22.1 per cent. Depreciation charges
were higher by 29.06 per cent.
company managed to protect its bottom line mostly through
a 71.01 per cent jump in other income for the quarter.
Honda had reported a net profit of Rs267.19 crore on total
revenues of Rs2,298.91 crore for the previous quarter
ended 31st March 2006.
Munjal, managing director Hero Honda said the company
has eight new launches planned for 2006. The company is
also undertaking capacity expansion in existing plants
at Gurgaon and Dharuhera by 4.50 lakh units each, which
will be completed by August 2006.
expansion at existing plants will increase production
capacity to 39 lakh units for this year. Hero Honda is
also planning a third plant with a production capacity
of 5 lakh units, which will cater to market demand beyond
Honda launched India''s first fuel injection motorcycle
- the 125
cc Hero Honda Glamour FI during the quarter. Competitor
Bajaj Auto is also expected to launch models with fuel
injection technology in the near future.