Motorcycle market leader Hero Honda has reported disappointing results for the quarter ended 30^th June 2006. The results are below market expectations as operating margins were impacted by rising costs. The company has been steadily losing market share to its closest competitor, Bajaj Auto, for the last couple of years.

Net profits for the quarter increased 16.28 per cent to Rs237.74 crore from Rs204.45 crore for the same quarter of previous year. Net sales increased by 19.59 per cent to Rs2,364.37 crore. Total revenues went up by 20.37 per cent to Rs2,416.65 crore from Rs2,007.63 crore.

Operating profits for the quarter were higher by 9.13 per cent but operating margins as a percentage of net sales declined to 13.49 per cent from 14.78 per cent for the previous year quarter.

Input costs increased 21.26 per cent during the quarter while staff costs were higher by 22.28 per cent. Other operating expenses increased by 22.1 per cent. Depreciation charges were higher by 29.06 per cent.

The company managed to protect its bottom line mostly through a 71.01 per cent jump in other income for the quarter.

Hero Honda had reported a net profit of Rs267.19 crore on total revenues of Rs2,298.91 crore for the previous quarter ended 31st March 2006.

Pawan Munjal, managing director Hero Honda said the company has eight new launches planned for 2006. The company is also undertaking capacity expansion in existing plants at Gurgaon and Dharuhera by 4.50 lakh units each, which will be completed by August 2006.

The expansion at existing plants will increase production capacity to 39 lakh units for this year. Hero Honda is also planning a third plant with a production capacity of 5 lakh units, which will cater to market demand beyond 2007.

Hero Honda launched India''s first fuel injection motorcycle - the 125 cc Hero Honda Glamour FI during the quarter. Competitor Bajaj Auto is also expected to launch models with fuel injection technology in the near future.