Hero MotoCorp’s net profit dwindles on poor sales

Shares of Hero MotoCorp on Friday slipped around 2% after the company reported a 95.38% decline in consolidated net profit for the first quarter ended June 30.
The stock declined 1.90% to Rs 2,757.65 on the BSE.
The country’s largest two-wheeler maker on Thursday reported a 95.38% decline in consolidated net profit at Rs 57.78 crore for the first quarter ended June 30, on account of lower sales due to coronavirus pandemic.
The company had posted a net profit of Rs 1,256.69 crore during April-June period of previous fiscal.
Delivering a positive bottom line, despite only 25% capacity utilization, reflects the resilience of the portfolio and ability to optimize costs and improve productivity.

Total income during the quarter under review declined to Rs 3,119.22 crore as compared with Rs 8,410.41 crore in the year-ago period.
Hero MotoCorp sold a total of 5.65 lakh units of motorcycles and scooters in the first quarter of fiscal 2020-21 as compared with 18.43 lakh units in the same period of 2019-20.
Operating profit margin dived to 3.6% from 14.4% in the year ago quarter as steep fall in sales volumes adversely impacted operating leverage.

Due to closure of manufacturing plants the company was unable to fully recover fixed costs. Excluding the fixed cost for the lockdown period, the operating profit margin for the quarter would have been 12%.
Realizations per vehicle improved from the earlier quarters, reflecting the benefits of BS-VI emission transition-led price hikes.

Sales in July increased 14% sequentially and are down just 4% from the year ago month. The company expects the recovery to continue.
The faster recovery in two-wheeler sales, greater presence of Hero MotoCorp in the economy and semi-urban, rural areas will continue to help the stock.

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