NEW DELHI: With high raw material cost and increased competition weighing heavily on its bottomline, Hero Honda Motors on Wednesday reported a 9.24 per cent dip in its net profit at Rs. 216 crore in the July-September quarter and unveiled two new variants to drive growth.

The turnover, however, went up by 3.6 per cent in the second quarter to Rs. 2,289 crore from Rs. 2,209 crore in the year-ago period.

Hero Honda, which launched two bikes this fiscal, announced the launch of two new variants — the new `Glamour' and `Passion Plus' limited edition. It had already launched `Glamour FI' and `CBZ X-treme' models this fiscal and had announced that the company would launch eight new bikes, including variants in 2006-07.

Engaged in a cutthroat competition with rival Bajaj Auto, the company saw earnings before interest, depreciation and taxation margins come down to 13 per cent from around 15.4 per cent in the same quarter last fiscal.

"The impact on operating margins has been due to increased inflationary costs in raw materials such as steel, aluminium and rubber," Hero Honda Managing Director, Pawan Munjal, said after the board cleared the second quarter results. However, he said the company had significantly countered the increase in raw material costs through improved efficiencies in production and cost management. Raw material costs as a proportion to net sales went up by 1.5 per cent this quarter.

The net profit in the first half of this fiscal stood at Rs. 453.71 crore against Rs. 442.37 crore in the same period last fiscal. Total turnover in April-September 2006 stood at Rs. 4,706.09 crore against Rs. 4,216.99 crore in the first half of 2005-06.

In the second quarter, the company signed on two new brand ambassadors — Indian cricketers Irfan Pathan and Suresh Raina — to leverage their mass appeal with the Indian youth. Both Irfan and Raina feature in Hero Honda's ongoing campaign "Heroes for Heroes", as part of which the "Mobike Pe Mobile" initiative has been rolled out for customers.

The Managing Director said Passion Plus was an important model for the company with significant sales contribution and the new limited edition variant would help reinforce its position. `Glamour' was being refreshed with stylish five spoke alloy wheels.

"Both these new models will further enhance sales growth for Hero Honda in the deluxe segment," the company said.

Last week, the company had laid the foundation for a new plant in Uttaranchal where it would invest Rs. 1,900 crore along with ancillaries by 2010 for a 1.5-million unit new production capacity. — PTI

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