The Hindu Business Line : Hero Honda net gains from cost-cutting drive

New Delhi, Jan 31 Buoyed by lower promotion, marketing and raw material costs, Hero Honda Motors Ltd on Thursday posted a 32 per cent rise in net profit at Rs 275.01 crore for the quarter ended December 31, 2007.

The company’s total income grew 3.5 per cent to Rs 2,795.17 crore for the quarter under review, the company informed the BSE in a filing. During the latest reported quarter, two- wheeler sales however remained flat at 8,93,581 units against 8,96,113 units in the year-ago period.

For the nine months period ended December 2007, net profit increased marginally at Rs 699.18 crore against Rs 662.89 crore, up 5.9 per cent. Total income during the period under review stood at Rs 7,673.43 crore as compared to Rs 7,405.72 crore in the year-ago period, up 3.61 per cent.

Hero Honda, the country’s largest two-wheeler manufacturer by sales, lowered raw material costs by 2 per cent to Rs 1,838 crore, the company said. The company also reduced its other expenses by 3 per cent to Rs 315 crore in the third quarter.

“We had undertaken some strategic initiatives since the beginning of this fiscal, including a conscious effort to rationalise costs across the board,” Mr Pawan Munjal, Hero Honda’s Managing Director said in the statement. Hero Honda expects to further improve its financial performance going forward as raw material prices soften, he added.

The company’s EBITDA (earnings before interest, taxes, depreciation and amortisation) margin rose to 13.95 per cent in the third quarter, from 12.39 per cent in the second quarter.

Hero Honda, which began operations in 1985, will start production at its third factory in April in Uttarakhand to meet an expected increase in sales. The company currently has two factories in Haryana where it produces models such as the Glamour and Hunk motorcycles and the Pleasure scooter.

Shares of Hero Honda fell 1.3 per cent to Rs 676.95 on the Bombay Stock Exchange.

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