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Hero Honda Motors reports financial results for the Year 2005-06

  • Net profit growth of 20%
  • Dividend of 1000% declared
  • Announces 3rd manufacturing plant
  • Announces 8 new launches for year 2006-07
  • To launch India’s first Fuel Injection (FI) motorcycle in June 2006
30 May 2006 , New Delhi : Hero Honda Motors Ltd., the ‘World No.1’ two-wheeler company for the fifth consecutive year, ended the financial year 2005-06 with a profitable growth, market leadership, and a series of industry defining initiatives.

The company announced plans for its third plant today. Jaipur has been selected as the site. The company announced an investment of Rs. 320 crore in the plant to install a production capacity of 5,00,000 units, expandable to a capacity of one million. The plant will be commissioned within 1 year.

The company also announced eight new launches in the year 2006-07, to strengthen its product portfolio across segments.

In line with its lineage of introducing the world’s best technologies to India, Hero Honda announced the launch of India’s first motorcycle with Fuel Injection (FI) technology in June 2006, with the launch of 125 cc Glamour FI. With this, Honda Motor Co. will debut this technology globally in 125 cc category, with Hero Honda.

Financial Performance - Yearly
Parameter FY 2005 – 06 FY 2004 – 05 Growth
Total Turnover Rs. 8866.71 Crores Rs.7558.55 Crores 17%
Profit Before Tax Rs.1412.24 Crores Rs.1217.25 crores 16%
Profit After Tax Rs. 971.34 Crores Rs. 810.47 Crores 20%
Operating margin 14.45% 14.56%  
EBIDTA margin 15.70% 15.75%  
Earnings Per Share (EPS) Rs. 48.64 Rs.40.59 20%
Dividend Rs.20.00 Rs. 20.00  
Fourth quarter
Parameter Quarter ended March 31, 2006 Quarter ended March 31, 2005 Growth
Total Turnover Rs. 2298.91 Crores Rs. 1976.09 Crores 16%
Profit Before Tax Rs. 379.68 Crores Rs. 303.07 crores 25%
Profit After Tax Rs. 267.19 Crores Rs. 207.11 Crores 29%
Operating margin 14.92% 13.78%  
EBIDTA margin 16.10% 15.11%  
Earnings Per Share (EPS) Rs. 13.38 Rs. 10.37 29%

In line with the company’s dividend policy, the Board of Directors of the company declared a dividend of Rs. 20.00 per share (1000%). The total amount of outflow on account of dividend including withholding tax would thereby be Rs. 455.39 crore.

Update on Business Strategies
Sales and market share leadership

Hero Honda crossed a unit sales threshold of 3 million units in the FY 2005-06, which is a worldwide first. This helped the company achieve the distinction of having a 15 million strong customer base since its inception. The company maintained its market leadership position with a healthy 40% share in the two wheeler industry.

Extending brand equity to new categories
Year 2005-06 saw the entry of Hero Honda into the scooter segment with 100 cc Pleasure, targeted primarily at women, which was launched in January 2006. Pleasure has been received very well by the market and is expected to revitalize the scooter market in India, and enhance the share of scooters amongst overall two wheelers.

Hero Honda has also delivered an industry first by launching a business line for pre-owned motorcycles branded as Hero Honda Sure!

Technological leadership
Continuing its two decade old tradition of introducing best-in-class products and technologies, Hero Honda introduced two new engine platforms (Quantum Core) for the 125 cc and 150 cc motorcycle categories, thereby consolidating its technological leadership in the motorcycle segment. These engines provide higher power and higher fuel efficiency, currently unmatched in the industry.

Stronger product portfolio
A total of 4 new motorcycles were launched in 2005-06 - CD Deluxe, the 125 cc Glamour, the 150 cc Achiever and the 125 cc Super Splendor all with long term warranty, and superior proposition in terms of fuel consumption and power delivery. Company’s new motorcycle launches have been a whopping success.

Path breaking retail and consumer initiatives
FY 2005-06, also witnessed industry redefining market initiatives by Hero Honda – launch of women exclusive retail outlets for the new scooter, Pleasure, under the brand name, Just4Her and launch of Lady Rider, India’s first women rider club.

Capacity expansion
To address the growing demand for its products, the company continued its capacity expansion initiatives in 2005-06 to take the total capacity to 3.9 million units. Expansion of 4,50,000 units at Gurgaon plan is already completed at an investment of Rs. 47 crores. Expansion of additional 4,50,000 units is underway at Dharuhera plant at an investment of Rs. 96 crores, which would be operational by August 2006.

Speaking on the occasion, Mr. Brijmohan Lall, Chairman, Hero Honda Motors said, “It has been a challenging year but we have pursued our strategic objectives with unabated zeal and maintained market leadership while delivering sustained profits”.

“We are committed to delivering highest possible returns to our shareholders, and our present dividend announcement reflects that”, he added.

According to Mr. Pawan Munjal, Managing Director, Hero Honda Motors, “Our new product launches in the year 2005-06 have been well received. Our scooter launch has seen a very encouraging market response. In motorcycles, new launches contribute 36% to our turnover, basis the success of Super Splendor & CD Deluxe. We took a number of market defining steps towards the last quarter, the impact of which could not be fully realized in the last year. Coupled with an even stronger pipeline of initiatives including eight new launches in 2006-07, we look forward to consolidating our leadership in two wheeler industry.”

“We are willing to trade certain short term gains to drive long term growth. Hero Honda is well-equipped to meet new challenges and set new precedents to remain at the forefront of the growing two wheeler market.”, he added.

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