Early birds results: India Inc feels margin pressure


From cement to FMCG, the story so far is one of margin pressure. The spike in the cost of raw materials and fuel is eating into profits even as companies raise prices. Indeed, the earnings season has got off to a somewhat subdued start, with most results disappointing the Street. Revenues for a set of 73 early birds grew just a shade over 12 per cent year-on-year for the three months to March. The operating profit margin for the sample contracted some 65 bps y-o-y, leaving the operating profit growth at 10 per cent y-o-y.

The sharp contraction in Nestle’s gross margins of 315 basis points y-o-y reflects the intensity of the inflation in key commodities such as edible oil and packaging materials. Despite a reasonably good increase in the top line of 10.2 per cent y-o-y, the company’s operating margin contracted by 200 bps y-o-y to 23.2 per cent, leaving the Ebitda (earnings before interest, tax, depreciation and amortisation) flat. The management observed that key raw materials were very expensive and was cautious about the inflationary outlook in the near term.

ACC’s operating margin contracted by about 600 bps y-o-y to 14.3 per cent despite an increase in blended realisations per tonne of 5 per cent y-o-y because operating costs per tonne jumped 13 per cent y-o-y and volumes were slightly lower. The company’s operating profit fell 25 per cent y-o-y.

Cement producers are raising prices and there has been a 5-6 per cent increase in April over March. However, analysts estimate it would take a total hike of 9-10 per cent for all the additional costs -incurred on diesel, coal and pet coke, to be passed on.

The tech pack put up a reasonably good performance. TCS stole the show with a record haul of orders at $11.3 billion and despite it being a seasonally weak quarter, Ebit margins came in at a strong 24.96 per cent, flat sequentially. Infosys missed estimates and is struggling with high attrition of 27 per cent; the Ebit margin came in at 21.5 per cent, a sharp compression of 200 bps quarter-on-quarter. HDFC Bank’s operating performance was lacklustre as operating profits were up just 5 per cent y-o-y on the back of a tepid rise in revenues; the better net profit growth of 23 per cent y-o-y was the result of a steep fall in provisions.

Producers of commodities are cashing in on the multi-year price highs. Revenues of Hindustan Zinc increased 27 per cent y-o-y driven up by higher zinc volumes.

Read the full article at: indianexpress.com

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