Hero Honda defies industry trend to post 50 percent jump in net profit in Q2 FY09

The two-wheeler major's net profit after tax stood at Rs.306.30 crore, up from Rs.204.33 crore posted in the corresponding period last year (year-on-year or YoY rise of 49.90 percent).

During the period under review, the company's total turnover grew from Rs.2361 crore to Rs.3202 crore (YoY gain of 35.62 percent) while its net sales grew from Rs.2352.09 crore to Rs.3189.71 crore (YoY rise of 35.61 percent).

The company has recorded an EBIDTA margin of 13.58 percent in the September quarter. The EBIDTA margin in the previous quarter (April - June 2008) was 12.20 percent.

"The strong financial performance is in line with the company's better-than-industry top line growth. After posting a growth 11.38 percent in the first quarter, the company kicked off the second quarter with a 39.8 percent growth in sales in the month of July, and followed up with 26.8 percent growth in August and 22.4 percent in September. Hero Honda consistently keeps growing its share in the domestic motorcycle market, and currently enjoys over 55 percent share," the company said in a statement.

The company has captured majority of the market share nearly across all segments with CD Deluxe (entry segment), Glamour, the new Splendor NXG, Splendor + and Passion Plus (deluxe segment), and Hunk, CBZ X-treme and Karizma (premium segment) driving its growth story.

Despite credit squeeze and slowdown of demand, the company's cumulative sales for the September quarter of FY09 stood at 9,72,095 units - a growth of 28.5 percent over the corresponding quarter of last year (FY08).

"We are happy with our financial performance. It gives immense joy to see this kind of results in the 25th year of our company. I wish to thank all our stakeholders – customers, associates, dealer friends, ancillaries and also our joint venture partners Honda Motors Co – for their continuous support," said Dr. Brij Mohan Lall, chairman, Hero Honda Motors Ltd.

According to Pawan Munjal, managing director and CEO, Hero Honda Motors Ltd, despite volatile and competitive environment, the company's "top line continues to outpace the industry growth."

"The company's topline as well as bottomline have seen a healthy growth mainly on account of growth in volume and the cost discipline within the company during this fiscal, besides our focus on customers' need and expansion of our dealer network," Munjal said.

"Our market share is at an all time high, and the financial balance sheet is a delight – all the factors which form the hallmark of a resilient company with cutting-edge management. We will continue to keep innovating – in bringing in technologically-superior products, in our network expansion, in brand building, in our financial management, and in our communication," he said.

However, the company was slightly conservative in its outlook. "Going forward, we will have to keep a close watch on the commodity prices movement, and other factors such as inflation, interest rate scenario and availability of retail finance. These factors will play a crucial role in the industry growth in the subsequent quarters," Pawan Munjal said.

The company has rolled out its festive season initiatives, with the launch of four new models – the all-new "Passion Pro" and three refreshes of its existing models - new CBZ X-treme, a self–start version of Splendor NXG and the refreshed Pleasure.

During the coming months, the company plans to further augment its product portfolio with new launches across segments.

However, following the festive season in October, the company expects sales to slow down, as customers are likely to defer purchases to next year, expecting newer models and cheaper financing costs.

"So far, the two-wheeler industry has grown by 14 percent and Hero Honda has registered a growth of 20 percent. However, post-Diwali, the industry will witness a slowdown and growth is expected to come to a single digit, though Hero Honda will hopefully continue to do better than the industry," said Anil Dua, vice president, Hero Honda Motors Ltd.