Auto, construction, metals and pharma sectors likely to boost general average; IT, FMCG subdued
The rising cost of raw materials and a relative slump in performance of oil companies are expected to hurt the profitability of the corporate sector in the fourth quarter, indicate a results’ review of 268 companies. The net profit growth rate of 38.8 per cent in the quarter under review has been slower compared to the 59 per cent reported by sample companies in the third quarter.
The rising cost of raw materials seems to be a real cause for concern, up 71.4 per cent compared to sales growth of 49.8 per cent. As a result, the operating margins on core business declined 54 basis points year on year in the quarter under review, compared to a 268-basis point increase in the fourth quarter.
The high weightage in the sample for the oil and gas giant, Reliance Industries, skewed the results in terms of growth in sales. But, profit for the remaining sample moved at a slower pace in the fourth quarter (up 45 per cent) compared to the third quarter (up 75.4 per cent). The operating margins excluding RIL were up 104 basis points (bps) in the fourth quarter, compared to 520 bps in the third.
| Q4 RESULTS REVIEW 268 COMPANIES | |||
| Quarter ended | Growth rates | Net profit | |
| Sales | OPM* | ||
| 9-Jun | -2.50 | 59 | 7.43 |
| 9-Sep | -0.50 | 91 | 13.21 |
| 9-Dec | 27.0 | 268 | 75.43 |
| 10-Mar | 49.82 | -54 | 44.96 |
| EXCLUDING RELIANCE INDUSTRIES | |||
| 9-Jun | 4.70 | 15 | 3.10 |
| 9-Sep | -2.25 | 177 | 8.72 |
| 9-Dec | 11.70 | 520 | 59.30 |
| 10-Mar | 33.64 | 104 | 38.75 |
| * Year on year change in basis points | |||
Overall, the fourth quarter results are expected to be robust, with auto ancillaries, automobiles, construction, media, metals and pharmaceutical firms likely to spur the profit growth, while refineries and oil marketing companies are expected to spoil it.
The results available so far indicate that profitability of capital goods, cement and sugar firms are expected to be under pressure, while fast moving consumer goods and technology firms are expected to show modest growth in sales and net profit.
The available results indicate that recovery in commercial vehicle demand and the stimulus package for the automobile sector benefitted auto ancillary companies. The net profit of 10 auto parts makers was up 265 per cent on a 59 per cent rise in net sales. Bosch (net profit up 300 per cent) and SKF (profit up 200 per cent) excelled.
The results from car, tractors and motorcycle makers suggest that sales and profit growth for the automobile sector may come under pressure from here onwards. Four auto makers together reported slower growth in sales in the quarter under review compared to the previous three quarters, while the profit growth rate slipped below 100 per cent for the first time after three quarters.
The cement sector appears set for its worst performance in recent times. However, only a few results are fully in and of the six companies for which these are available, four companies have posted 28 per cent rise in net profit on the back of flat revenue. Ambuja Cement, Birla Corporation and Chettinad Cement reported a big jump in profit. However, the data for the other big firms should be much duller.
The strong price rise in ferrous and non-ferrous metals and strong demand from automobiles and infrastructure segments is driving sales and profit growth of metal companies.
Hindustan Zinc and Sterlite Industries recorded strong performance, with net profit growth of over 100 per cent each.
Volumes for most software service companies remain subdued, with three front-line companies, Infosys Technologies, TCS and Wipro, reporting single-digit growth in sales. Thanks to TCS, net profit rose 18 per cent year on year, marginally better than the previous three quarters.
