Hero Honda profits slides by 15 per cent

Hero Honda, now the largest two wheeler manufacturer by volume has disclosed its 3Q report. The company has displayed scrolled down profits by 15% as compared to its 2Q. The reason behind the skewed profits is explained to be the spiralling input costs. And the bad time is still not over for the company as they have to face the same increased input cost in next quarter as well.

The conglomerate showed the third quarter sales to be 12.85 lakh units, including both bikes and scooters which is astonishingly the highest in its history. But the major reason of declined profits is the increase in material cost which took an exceptional hike from Rs 2,768 crore in last year to Rs 3,385 crore. This is an absolute 22% increase which has certainly laid an impact on the accounts. This inflated cost has cancelled out the high sales made by the company, which kept the best performance uncelebrated.

The net profit has scrolled down to Rs. 506 crore in the second quarter from Rs 597 crore year-on-year.

Market analyst believes that the company will be still facing hard times as the material price will not fall down in the last quarter. The company has underperformed according to many people. They found the performance much below the expectations from the big brand.

This time the company is facing the capacity hindrance as well so it is probably going to take a little More time to improve its position in the market.

Talking about the company shares, it has reduced to 2.2% in the BSE. With this the company is planning to enhance its capacity by 9% with an aim to increase its sales up to 50 lakh two-wheelers. This output is expected to meet the increasing demand in markets.

Press Release:

A senior company executive said, preferring not to go on record, “We are working out plans to set up a new plant as our existing capacity of 54 lakh would be exhausted in this fiscal. An announcement for a greenfield plant is expected shortly,”