Q4 Results: Hero MotoCorp’s Profit Slumps; Expects Recovery In Second Half Of FY20
Lower sales, higher raw material costs and higher employee expenses hurt Hero MotoCorp.
Hero MotoCorp Ltd.’s quarterly profit fell sharply as India’s largest two-wheeler maker continued to face challenges from the slowdown in the automobile industry.
Net profit fell 24.5 percent over last year to Rs 730.3 crore in the January-March period, the company said in a regulatory filing. That compares with the Rs 746-crore consensus estimate of the analysts tracked by Bloomberg.
- Revenue declined 7.9 percent year-on-year to Rs 7,885 crore.
- Operating profit fell 22 percent to Rs 1,069 crore.
- Margin narrowed 240 basis points to 13.6 percent.
The company’s sales declined 11 percent during the fourth quarter. It cut wholesales to dealers to correct its inventory levels on the back of lower demand. Higher raw material costs added to its woes. That only underscores the pain that Indian automotive industry has now been facing for over eight months now.
Yet, the management remains confident of a recovery later this year. “While the near-term prospect of the domestic two-wheeler market is likely to remain challenging, the festive season, however, is expected to brighten the sentiment and revive growth in the second half of FY20,” Chairman Pawan Munjal said in a media statement.
Munjal said the company will look to gain market share aggressively in the entry-level 125cc engine and the 200 cc engine categories. That may pay off, too. A recent report by JM Financial had said automobile companies that are “driven by aggressive sales and promotion strategy and new model launches” will be the ones that will stand out this year.
The company, like other vehicle makers, also sees hurdles from the implementation of the new emission norms.
Shares of Hero MotoCorp closed 0.51 percent lower ahead of the results announcement, compared with a 0.87 percent rise in the benchmark BSE Sensex.