The country's largest two-wheeler maker Hero MotoCorp
today reported its fourth consecutive decline in quarterly profit by 10.86% for the three months ended June30,2013 on account of higher taxes due to the expiry of a five-year exemption at its Hardwar facility and the levy of a new surcharge.
For the first quarter ended June 2013 net profit at the company stood at Rs 548.58 crore as compared to Rs 615.46 crore during the corresponding period last year. The company registered net sales of Rs 6126.84 crore in the period under review – a drop of 1.30% over Rs 6207.78 crore recorded in the year-ago period.
"The profit after tax of company in Q1 2014 was lower due to higher tax rate on account of the expiry of five years of 100% exemption in Haridwar, where the largest producing manufacturing plant of the company is situated. With the expiry of the tax benefit, the tax liability on Hero MotoCorp went up to 26.9% for the quarter under review, whereas it was 16.3% in the previous quarter…The lower PAT (profit after tax) is also reflective of the newly levied higher surcharge in the Financial Bill 2013,” the company said.
A 10% surcharge on income tax was introduced in the budget this fiscal, which raised the effective tax rate of the company by three percentage points.
In the first quarter, Hero MotoCorp’s domestic sales declined by 4.24per from a year ago to 1.52 million units. Exports dropped by around 30% to 31,303 units. However, profit before tax rose 2.06% toRs.750.1 crore.
“The fact that our PBT has surpassed the previous as well as corresponding quarter, despite a marginal de-growth in our volumes during the quarter and the overall economic downturn, is a strong statement of our intent and vision,” said Pawan Munjal, managing director and chief executive officer, Hero MotoCorp.
He added the company had good sales in April and May but "heavy and early rains in June have slowed down the momentum a bit, but we are optimistic about growth in the second half of the fiscal." The company has scheduled launches around the festive season which Munjal said would contribute towards accelerating growth.
To expand its international footprint, Hero has already entered markets in Central America and Africa. The company is looking at foraying intoLatin American markets of Peru and Ecuador in the month of August.
Shares of Hero MotoCorp were trading at Rs 1,757.75 a piece, down by 1.50% from its previous close on the Bombay Stock Exchange.