| Profitability of domestic firms relying on rural economy declined.
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| If a company is to be extremely profitable, it has to operate in industries that have global linkages. This conclusion can be drawn from the performance of the 1,250 companies that have declared their first-quarter results till July 31.
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| Only 44 per cent (499 companies) of the 1,250 companies posted a staggering 180.1 per cent rise in net profit and a 28.1 per cent rise in sales in the quarter ended June 2004. Their profit margins increased by anywhere between 350 basis points and 500 basis points from June 2003.
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| These companies account for 29 per cent of the total net profit of the 1,250 companies, up from 14 per cent in corresponding quarter of the previous year.
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| The remaining 56 per cent of the companies reported a far more modest 20 per cent growth in both sales and profits.
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| Predictably, the profitability of domestic consumer goods companies and those relying heavily on the rural economy declined.
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| The 1,250 companies posted a 22.2 per cent rise in sales and a hefty 43.1 per cent jump in net profit, indicating an improvement in major profitability ratios.
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| The operating profit margin (OPM) for the sample was up almost 50 basis points to 16.81 per cent. The gross profit margin increased 115 basis points to 14.64 per cent, while the net profit margin was up a solid 112 basis points to 7.62 per cent.
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| The sub-sample of companies that did not fare as spectacularly comprised 687 companies with a 17.9 per cent rise in net profit and a 15.3 per cent rise in sales. Their profit margins were marginally up 10-25 basis points.
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| India Inc’s profit drivers in the first quarter were fertilisers (the industry turned around with a net profit of Rs 115 crore), chemicals (net up 299 per cent), telecom (net up 267 per cent) and steel (net up 230 per cent).
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| The engineering, petrochemicals, sugar, tea, hotels, commercial vehicles, tractors, cement, aluminium, shipping, textile and paper industries outperformed the corporate sector in terms of profit growth.
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| The industries that performed badly included personal care (net down 39 per cent), lubricants (net down 42 per cent), food products and pharmaceuticals (net up 3 per cent each) and 2/3 wheelers (net up 15 per cent) industries. |
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Content Guide
