Manufacturing sector profit to fall by 5.7%: CMIE

Centre for Monitoring Indian Economy (CMIE) has revised downwards its net profit forecast for the manufacturing sector for the second quarter ended September 30, primarily due to the poor show of petroleum products industry.

"We now expect net profit to fall by 5.7%, against our earlier expectations of a 34.2% rise. This is on account of a downward revision in the profit forecast of the petroleum products industry," CMIE said in its monthly review.

However, the economic think tank expects the manufacturing sector to maintain its growth momentum in terms of net sales. It expects that the sector will report an increase of 20.7% in the September quarter.

A steep fall in profit of the petroleum products industry and huge losses to be incurred by the aviation industry are expected to restrict the growth in corporate profit in the second quarter, it said.

While the removal of 5% import duty on crude in June was expected to have a positive impact on the profits of petroleum products industry, a sharp rise in crude prices in July "prompted us to revise our forecast for the September quarter and for the full fiscal," it added.

"The industry is now expected to report a steep 56.7% fall in net profit in the second quarter as against 33.1% fall expected earlier," CMIE said.

But, if the petroleum products are not factored in, the net profit forecast for the manufacturing sector in the second quarter almost remained unchanged at 32.5%.

"Growth will be driven by an improvement in the profit performance of sugar and the drugs industry. We expect both the industries to make net profit in the current quarter as against the losses incurred in the year-ago period," it said.

Manufacturing companies (non-petroleum) reported a 19.7% rise in aggregate net sales in the June quarter. This was a combination of higher sales volumes and an increase in unit realisation.

For the full fiscal, CMIE expects net profit of the manufacturing sector to grow by 17.5%. The bottomline of the petroleum products industry is expected to grow by 12.9%, while that of the rest of the manufacturing sector is expected to grow by 19.1%.

"We expect net sales of the manufacturing sector to rise by 18.7% in financial year 2011-12. Growth will be combination of higher sales volumes and a rise in average unit realisation," it said.