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Hero MotoCorp Q4 Results: Profit, Revenue Fall On Covid-19-Induced Supply Woes

Net profit fell 15% year-on-year to Rs 620.7 crore.

A Hero MotoCorp Ltd. Xtreme 200R motorcycle, left, stands on display at the Auto Expo 2018 held in Noida, Uttar Pradesh, India. (Photographer: Anindito Mukherjee/Bloomberg)
A Hero MotoCorp Ltd. Xtreme 200R motorcycle, left, stands on display at the Auto Expo 2018 held in Noida, Uttar Pradesh, India. (Photographer: Anindito Mukherjee/Bloomberg)

Hero MotoCorp Ltd.’s quarterly profit fell as a pandemic induced lockdown in March ate into the company’s already struggling sales.

Net profit fell 15% year-on-year to Rs 620.7 crore in the quarter ended March, the two-wheeler maker said in an exchange filing. Analysts tracked by Bloomberg had pegged the profit at Rs 569 crore.

  • Revenue fell 21% to Rs 6,238.4 crore—compared with the estimated Rs 6,130 crore.
  • Operating profit fell 38% to Rs 660 crore.
  • Margin narrowed to 10.6% from 13.6% earlier.

Supply issues due to the Covid-19 outbreak across the world hit sales at India’s largest two-wheeler maker. Besides, the nationwide lockdown forced auto retailers to shutter their outlets hampering sales further. While sales fell 42% in March, they were 25% lower than last year during the quarter. “Covid-19 has resulted in interrupted supply chains, halted production and lock-down, leading to no retails,” Hero MotoCorp had said earlier while announcing a shutdown of its factories.

That, however, isn’t the only trouble bogging down India’s automakers. Increased upfront insurance costs, a broader consumption slowdown and disruption caused by BS-VI emission norms have also hurt sales.

Yet, the company benefited from a significantly lower tax payout and cheaper raw materials. Tax expense fell 91% over last year to Rs 30 crore. Besides, the transition to BS-VI drove up the earnings per vehicle for Hero MotoCorp by 6% to Rs 46,747.

The company is now in the process of jumpstarting its business. Almost 1,500 of its retail touchpoints were active by the second week of May. It’s now also cutting down spending to improve profitability.

“As we march towards rapid recovery from lockdown, we have taken several measures towards saving cost, improve the productivity of spends, and conserve cash,” said Niranjan Gupta, chief financial officer of Hero MotoCorp, was quoted as saying in a statement. “We have rationalised capex spends for the financial year by half, doubled target for the Leap-II program, and launched an initiative to improve the productivity of our overheads.”

Hero Motocorp expects that these initiatives along with upcoming launches and digital solutions for sales will help the company tackle uncertainties arising from the pandemic.

Shares of Hero MotoCorp ended largely flat, ahead of the results, while the benchmark Nifty 50 closed trade 1.2% down.