Hero Honda's net profit falls 14% in 2010-11 at Rs 1,928 crore

The country's largest two-wheeler maker Hero Honda today reported 13.62 per cent decline in its net profit for 2010-11 at Rs 1,927.90 crore, mainly due to higher expenses on raw materials and payment of license fee to erstwhile promoter Honda.
Hero Honda's net profit stood at Rs 2,231.83 crore in FY'10, the company said in a statement.

The total income from operations during last fiscal, however, increased by 22.32 per cent to Rs 19,401.15 crore from Rs 15,860.51 crore in 2009-10.

Hero Honda sold a total of 54,02,444 motorcycles and scooters in FY'11 as against 46,00,130 units in the previous fiscal, up 17.44 per cent.

"There was tremendous pressure on margins during the year due to higher input costs and also due to upgradation of technology to comply with BSIII emission norms, which we could not fully pass on to customers," Hero Honda Motors Ltd (HHML) Chief Financial Officer Ravi Sud told PTI.

Moreover, the company has decided to amortise the licence fee payment of Rs 2,479.33 crore to Japan's Honda that will be reflected on its balance sheet over the next 14 quarters. When equally divided, the expected outgo per quarter is Rs 177.1 crore.
"So for every quarter till June 30, 2014, there will be a reflection of this license fee payment, but there will not be any royalty payment made to Honda anymore," he added. During the fiscal, the company spent Rs 14,135.17 crore in purchasing raw materials compared to Rs 10,730.41 crore in the previous fiscal, which is up by 31.73 per cent.

The company's provisioning for depreciation also went up by over two-fold to Rs 402.38 crore from Rs 191.47 crore. Besides, other expenditure in last year rose by 14.31 per cent to Rs 2,054.10 crore from Rs 1,796.88 crore in FY'10. The HHML board recommended a final dividend of 1,750 per cent, which is Rs 35 per share of the face value of Rs 2 each for 2010-11.

Reacting to the results, shares of the company today closed 3.63 per cent down at Rs 1,600.10 a piece on the Bombay Stock Exchange. Commenting on the results, HHML Chairman Brijmohan Lall said: "Our performance all through the fiscal 2011 has been very satisfying. We crossed the five million sales mark in a year for the first time and recorded robust volumes of 5.4 million."

For the quarter ended March 31, 2011, Hero Honda's net profit slipped 16.23 per cent to Rs 501.61 crore from Rs 598.81 crore in the corresponding quarter of 2009-10.