Slowing operating profits of cos keep earnings in check
NEW DELHI: Corporate India reported mixed performance in the December quarter, with double-digit revenue growth but operating profit lagging for manufacturing companies as cost pressures continued.
“So far, the results season seems to be a fairly mixed bag, with 40% of companies having announced results in the fiscal third quarter with an upgrade/ downgrade ratio of 1:2,” said Manish Jain, a fund manager at Ambit Asset Management. The large companies have delivered earnings growth, led by margin expansion as volume growth moderated, Jain added.
Price hikes companies took to offset inflation drove revenue growth even as weak volume growth eroded some gains. According to data for 399 companies (excluding banks and financial companies) analysed by Mint, net sales in the December quarter rose 15.9% from a year earlier, the slowest in eight quarters.
Further, companies continued to feel the impact of higher input costs, though the intensity of the cost pressure ebbed.
Profit before interest, tax and depreciation (PBIDT) grew by 1.5%. Raw material costs rose 14.5% from a year earlier during the December quarter, slower than the 40% rise in the preceding three months.
Further, higher interest costs crimped earnings, with net profit declining 3.8% from a year earlier but gaining 11% from the preceding September quarter.
The BFSI (banking, financial services and insurance) sector continued its stellar show.
An analysis of the data for 495 companies, including banks and financial companies, showed net revenue grew 15.9%, PBIDT rose 14.5%, and net profit advanced 9.7%.
Analysts said that mid- and small-sized companies delivered fairly robust growth owing to market share gains.
Only some companies’ earnings were supported by the softening of raw material costs, and overall, the performance remains a mixed bag, said Amnish Aggarwal, head of research at Prabhudas Lilladher Pvt. Ltd.
The December quarter was also better than anticipated for the IT services companies. Analysts were expecting cuts in revenue forecasts in the current quarter due to the slowdown in western markets. Caution still prevails, but, tier-i IT services companies outperformed on revenue performance, experts said.