Financial Daily from THE HINDU group of publications
Saturday, Oct 19, 2002
Corporate Results - Two/Three Wheelers
Columns - Microscope
Hero Honda: Slowed down by competition
TWO-wheeler major Hero Honda has reported a 42 per cent growth in post-tax earnings and a 19.02 per cent rise in turnover for the quarter ended September 2002.
Considering that the motorcycle sales volume during this period jumped 23.56 per cent to 4.08 lakh units, the company has seen a net decline in per unit realisation, compared to about Rs 30,320 from Rs 31,478 recorded in the quarter ended September 2001.
The drop in net realisation is indicative of the change in product mix in favour of lower priced models. The launch of low priced model - Dawn - appears to have played a key role in pulling down the per unit realisation.
The operating profit margin during this period however improved to 16.58 per cent from 14.06 per cent recorded in the quarter ended September 2001. This is reflective of the company's operational efficiency and the persistent efforts towards indigenisation. Owing to higher turnover and improvement in profit margin, taxation provision increased to Rs 71.58 crore from Rs 50.75 crore.
The post-tax earnings increased by 42 per cent to Rs 139.84 crore. For the first half ended September 2002, turnover increased by 27 per cent to Rs 2,510.27 crore, the post-tax earnings rose 57 per cent to Rs 428.48 crore.
While the performance of Hero Honda for the second quarter or for the first half of the current fiscal may indicate an overall growth, it does not reflect the recent happenings at the market place.
The financial performance (in comparison to the corresponding period of the previous year) does not reflect the impact of the competitive pressure that Hero Honda has been facing in the recent months. On a sequential basis, Hero Honda's performance for the quarter ended September 2002 has recorded a marginal drop in comparison to the immediately preceding quarter.
From Rs 1,274.37 crore recorded in the quarter ended June 2002, Hero Honda's turnover dropped to Rs 1,235.9 crore during the three-month period ended September 2002.
In terms of physical volume, motorcycle sales dropped to 4.08 lakh units from 4.22 lakh units. This is reflective of the mounting competitive pressure from rivals Bajaj Auto and TVS Motor.
For the month of September 2002, Hero Honda posted a 2.8 per cent drop in domestic sales volume in comparison to the previous month. The success of TVS Victor and Bajaj's Boxer and Pulsar models appears to have affected growth prospects for Hero Honda.
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