India Incs profitability under pressure in Q1

Written by Pradip Kumar Dey | Mumbai, Jul 28 | Updated: Jul 29 2008, 07:55am hrs
Corporate India's first quarter performance reflects continuing pressure on the bottom line. A study carried out by FE, on 634 companies, who have declared their first quarter results indicates that net earnings have grown by 17.1% to Rs 34,413 crore from Rs 29,385 crore during the same period in 2007. Overall, sales grew 31% to Rs 2,90,581 crore during the first quarter of FY09 the level of Rs 2,21,832 crore during April-June 2007.

Significantly, the net profit margin that indicates the percentage of net profit earned for every hundred rupee sale, or the overall profitability, dipped from 13.25% to 11.84% during the first quarter of FY09. DR Dogra, DMD CARE said, "The reporting season for June 2008 quarter has begun against the backdrop of higher inflation, lower IIP numbers, rising interest rates and crude oil prices. Interest sensitive and input cost sensitive sectors like auto, banking and cement had faced difficult times in Q1."

An industry-wise analysis indicates that electronics, food-processing, fertilisers, entertainment, telecommunications and media have done exceptionally well during the first quarter. The net profit of electronics (comprising nine major companies) increased by 140.1% to Rs 197.44 crore during April-June 2008 from Rs 82.23 crore during April-June 2007. The net sales figure of the group decreased by 1.22% to Rs 2,525 crore during April-June 2008.

In the case of food-products, the total net profit figure of 10 companies rose by 107.02% to Rs 33.31 crore from Rs 16.09 crore. The sales figure of this group also increased by 45.8% during the study period. An analyst from rating agency said: "food product companies' strategy to focus on retail and branded product market has led to better results in Q1. "Similarly, in the case of fertilisers, the total net profit figure of nine major companies increased by 582.5% to Rs 302.40 crore during April-June 2008 from Rs 44.31 crore during April-June 2007. Total sales of this group increased by 99.6% to Rs 6,290 crore during April-June 2008. This is partly due to the low base in the previous year, the analyst added. On the profit front, as many as eight sectors recorded lower net profit during April-June 2008. On the other hand, twelve industry groups witnessed an increase of 25% or more in net profits during the study period.