The poor run of results for the March quarter continues with the likes of ABB and Hero Motocorp posting disappointing numbers. Hindustan Unilever, however, reported profits that were in line with estimates; what was encouraging was the underlying volume growth at 6% year-on-year. The Dabur India management indicated that a recovery in urban markets might be some time away.
The Hero management shared a subdued outlook for the two-wheeler industry in FY16, pegging the growth between 5 and 7%, an indication of low consumer confidence.
Hero has a strong presence in rural markets. Construction firms continue to perform poorly in a weak economic environment as seen in the weak numbers reported by HCC; stretched working capital cycles are impacting execution and the company reported a drop in standalone sales in the March quarter. Very small order inflows at ABB reflect the weak capex cycle; revenues in the quarter fell 1% y-o-y.
Maruti’s was a sterling performance but cautious commentary from the likes of a TCS will probably result in further downgrades in earnings estimates for FY16. Indeed, the sharp correction in the prices of commodities, notwithstanding profit margins, aren’t really as robust as one would have expected. That’s because demand —whether for construction material such as cement or two wheelers— remains subdued and consequently companies are finding it hard to push through volumes. Few have been able to raise prices. With the prospect of a less than normal monsoon looming large, rural demand could be impacted in the coming months further pressuring demand.