New Delhi, May 11: Hero Honda Motors today posted a 12 per cent decline in its net profit to Rs 857.89 crore for the fiscal ending March 31 against Rs 971.34 crore in the previous fiscal.

According to a release issued by the company to the Bombay Stock Exchange (BSE), the company’s turnover for 2006-07 increased to Rs 10,089.81 crore from Rs 8,870.26 crore a year ago.

For the fourth quarter ended March 31, 2007, the company posted a net profit of Rs 195 crore compared with Rs 267.19 crore in the corresponding quarter of the previous fiscal.

Firm interest rates, volatile raw material prices and cut-throat competition led to the 27 per cent fall in the quarterly profit.

“On the raw material front, there seems to be no relief as of now,” managing director Pawan Munjal said.

“There has been pressure on the margins and intense competition is one of the reasons for this,” he added.

Asked if the pressure on margins would continue to affect the company’s profitability, Munjal said: “At present, margins will continue to be under pressure, but we are taking internal steps, including value engineering, which will keep us on the growth path.”

Munjal was optimistic of overcoming the pressures and hoped the company would further consolidate its sales.

“In the fourth quarter, the market took a beating but we managed to grow our share to above 49 per cent,” he added.

Munjal said the company was expecting some tax reliefs once its plant in Hardwar, which is in Uttaranchal, starts making bikes from the middle of this year.

“When we start production at the plant, we will decide on how to utilise the benefit,” he said, when asked if the company would try to improve profitability rather than passing the benefit to customers.

Hero Honda’s total turnover for the fourth quarter increased 16.75 per cent to Rs 2,684.09 crore from Rs 2,298.91 crore in the year-ago period. The Hero Honda board today approved a final dividend of Rs 17 on a share of Rs 2 each (850 per cent).

The company’s shares were down marginally at Rs 704.80 over yesterday’s closing on the BSE.

The company had reported an 11.19 per cent growth in its vehicle sales for 2006-07 at 33,36,756 units against 30,00,751 units in 2005-06.

In April, Bajaj two-wheeler sales fell 10 per cent to 190,052 units, while Hero Honda sales rose 4.9 per cent to 262,544.