Hero MotoCorp, the world’s largest two-wheeler maker, said it has cut its estimate for expenditure on capital expenses — such as factory expansion — by half for the current year due to the COVID-19 pandemic.
The company had said it would invest Rs 10,000 cr in the next five to seven years for product development, new manufacturing facilities and network expansion.
The company, which also reporting a whopping 21% fall in its March quarter revenue, said it was putting in place emergency measures to deal with the fallout of the pandemic.
“..we have taken several measures towards saving cost , improving productivity of spends, and conserving cash,” said chief financial officer Niranjan Gupta.
“We have rationalized capex spends for the financial year by half, doubled target for the Leap-II [cost cutting] program, and launched an initiative to improve the productivity of our overheads.”
“We will continue to monitor our plans, and stay prepared dynamically to do course correction if and when required,” he added.
Even though India went for a lock-down only on March 25, Hero MotoCorp still saw a sharp impact of the Coronavirus epidemic on its performance during the January-March quarter.
Besides the 21% fall in revenue to Rs 6,238, operating profit (EBITDA) also fell to 10.6% of revenue from 13.6% of revenue a year earlier. Two years ago, it was at 16%.
“Revenue and EBITDA for the quarter was impacted due to lockdown and one off items. Excluding the same, Revenue would have been Rs 7,403 cr, at underlying EBITDA margin of 13.5%,” the automaker said.
Net profit fell to Rs 621 for the three-month period from Rs 730 cr a year earlier.
All this was the result of a 26% fall in the number of two-wheelers sold by the company during the three-month period. Compared to 17.81 lakh units sold in Jan-Mar 2019, the company sold only 13.23 lakh vehicles during Jan-Mar 2020. In Jan-Mar 2018, Hero MotoCorp had sold around 20 lakh vehicles.
Chairman Pawan Munjal called upon the government to take steps to bring back consumer confidence.
“As businesses and governments continue to learn and adapt to this evolving situation, strategic measures are needed to rapidly boost the customer sentiment and bring vitality to the market through focused economic measures,” he said.