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Riding on a 24 per cent increase in the number of vehicles sold, two-wheeler major, Hero Honda Motors, has posted a 32 per cent jump in net sales and a 13.5 per cent increase in net profit during the quarter ended June 30, 2011, over the same quarter of last year.
While the profit after tax has risen to Rs 557.89 crore in the latest quarter from Rs 491.69 crore in April-June 2010, net sales have registered an even bigger jump to Rs 5,637.64 crore (Rs 4,264.61 crore) during the same period.
According to a company release, Hero Honda sold an all-time-high 15.30 lakh units during the latest quarter, a 24 per cent growth over the 12.34 lakh units sold in the corresponding quarter of the previous fiscal.
The company's earnings before interest, tax, depreciation and amortisation rose by over 38 over to Rs 906.17 crore in this quarter as against Rs 655.96 crore in the same quarter of 2010-11.
The 13.5 per cent growth in Hero Honda's net profit comes despite the company providing Rs 239.79 crore towards depreciation for the latest quarter, representing an almost five-fold increase on depreciation of Rs 48.28 crore in April-June 2010.
Mr Pawan Munjal, Managing Director and CEO, Hero Honda, said the company's Q1 performance has set the tone for the coming quarters and “we are confident of meeting our sales target of over six million units for this fiscal.”
Besides robust volume growth, the company has also recorded a Rs 35-crore increase in other income. “This is because we had given an interim dividend of Rs 1,400 crore on account of which we had to incur dividend distribution tax. To enable this payment, we had to liquidate some of our mutual fund investments, which had led to the extra income. Our tax rate in the quarter has also dropped — this year we expect it to remain at 17.5 per cent,” Mr Ravi Sud, CFO, Hero Honda told Business Line .
He added that raw material prices have been the highest ever in the first quarter, at 75 per cent of net sales. “We had effected a price increase in late-June, which we expect will improve our EBITDA going forward. Some relief in the price of commodities such as steel and aluminium is also expected,” he said.
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