OLD STOCK, FALLING SALES DENT HERO’S PROFIT, MARGIN
Hero MotoCorp Ltd’s fiscal fourth quarter profit fell 14% as India’s largest motorcycle maker sold Bharat Stage III compliant two-wheelers at a discount to clear inventory, following a court directive.
Net profit declined to ₹717.75 crore in the three months ended March 31 from ₹833.29 crore in the year ago period.
That compares with the ₹741.3 crore estimate of 25 analysts in a Bloomberg survey.
Net sales fell 7.6% to ₹7,606.31 crore from ₹8,227.93 crore. Twowheeler sales declined 7% to 1.6 million in the quarter from 1.72 million a year ago.
Ebitda margin for the quarter narrowed to 12.79% in the March quarter from 14.66% in the yearago period.
The company said in a statement that it had taken a proactive approach towards the launch of BS IV compliant vehicles, and liquidated large BS III inventory leading up to March 29. The cost of liquidation of BS III inventory at a discount was ₹193 crore.
“In the last two days of the month, the company took some tactical steps to assist its dealers and incentivise the customers with an objective to liquidate the remaining BS III stocks, resulting in a one-time impact on the margins of the fourth quarter,” it said in a statement.
This was the second straight quarterly decline in profits for the New Delhi-based company. It has ceded market share to former partner and now rival Honda Motorcycle & Scooters India.
Hero, however, has vowed to stem the decline in market share as it plans to introduce at least six new models in 2017-18, apart from making a capital expenditure of ₹2,500 crore until 2018-19.