India Inc Q2 results signal slowdown

Second-quarter corporate results show a significant slowdown in sales and profit growth.

In spite of a 37 per cent surge in other income, the net profit of 1,400 manufacturing and services companies that have declared their results rose only 21.24 per cent compared with 33.77 per cent in April-June (27.3 per cent excluding other income).

Sales growth of 12.2 per cent is the lowest since March 2004.

State-owned oil companies, which saw sales growth fall 1.5 per cent, impeded overall growth. Reliance Industries, with sales growth of 6.6 per cent, could not help matters much.

However, its net profit growth of 27.9 per cent pulled up the oil sector's net profit by 20 per cent, in line with the overall figure. 
 

THE GROWTH STORY (YoY quarterly growth rate in %)
	Sales	Net profit
Mar-04	5.98	18.04
Jun-04	19.57	36.48
Sep-04	21.36	23.04
Dec-04	23.65	27.89
Mar-05	20.82	37.98
Jun-05	16.88	16.15
Sep-05	18.90	15.90
Dec-05	14.65	-0.79
Mar-06	19.34	18.75
Jun-06	28.25	33.11
Sep-06	31.26	47.62
Dec-06	26.82	60.55
Mar-07	19.75	13.85
Jun-07	16.81	33.77
Sep-07	12.20	21.24
Source: BSRB

The other culprits were a host of small and medium companies that posted no more than single-digit growth in sales.

The impact of the recession in automobiles was most pronounced in the topline of motorcycle manufacturers, which saw sales fall 4 per cent, and heavy commercial vehicles, for which sales rose a dismal 2.3 per cent.

Expectedly, makers of some automotive components "" axles, clutches, engine parts, sheet metals and shock absorbers "" felt the cascading effect and posted only a 3 to 5 per cent rise in sales. However, makers of brakes, electrical equipment, gears and lamps defied the odds to post double-digit sales growth.

The cement sector's sales rose 22.8 per cent, healthy at first glance but the lowest in four quarters. The profit growth at 45.2 per cent was the lowest in three.

Ferrous and non-ferrous metal companies underperformed due to the fall in international prices.

Sales of integrated steel companies rose 12.3 per cent and net profit 16.1 per cent. Their small and medium siblings did better with sales and profit growth of over 25 per cent each.

Tea companies, multinational pharmaceutical companies, IT-enabled services, paper, tyre and fertilisers posted only single-digit growth in sales.