Sales rev up, but profit takes a knock

SECOND QUARTER RESULTS REVIEW

India Inc's profit growth rate slowed down considerably in the quarter ended September 2005. The aggregate net profit of Corporate India grew by 16.14 per cent against over 20 per cent in the same quarter of the previous financial year. In the first quarter of FY06, the profit growth was 20.35 per cent.

Growth in sales in Q2 was higher at 18.32 per cent against 17.88 per cent in Q1. The study is based on 1,600 companies across sectors, including banking and finance, manufacturing and services for which Q1 and Q2 unaudited results are available.

The financial performance of 110 sectors tracked by the Business Standard Research Bureau has revealed that as many as 41 sectors performed well in Q2, posting sales growth of over 20 per cent; 34 sectors registered sales growth between 10 per cent and 20 per cent, while 23 sectors posted a single-digit growth in sales. Only 12 sectors registered decline in sales in Q2.

In the first quarter of 2006, sales of 45 sectors had risen by over 20 per cent each; 40 sectors posted sales growth rate between 10 per cent and 20 per cent; and 16 sectors posted single-digit growth in sales. In Q1, only nine sectors had failed to increase their sales revenue.

It has been a mixed trend on the profit front. Net profit of 20 sectors increased by over 100 per cent; 17 sectors showed a net profit growth rate between 25 per cent and 100 per cent; 16 showed 10 per cent to 25 per cent rise; and nine showed a single-digit growth.

Six sectors staged a turnaround in Q2; four slipped into the red and 21 sectors showed a decline in net profit.

In the first quarter of the year, 30 sectors had registered over a 100 per cent growth in net profits; 26 sector showed a net profit growth between 50 and 100 per cent; 22 sectors between 25 per cent and 50 per cent; 14 sectors between 10 per cent and 25 per cent, while four sectors posted a single-digit growth. Six sectors turned around in Q1, two slipped into the red and six saw a decline in Q1 net profit.

Click here for the Sectoral study table

Integrated steel, steel products, shipping, manmade fibres, electrical, trading and granite suffered a severe setback in Q2 of FY 06. These sectors posted either minimal growth or a decline in sales during the quarter ended September 2004.

Power transmission, steel tubes, engineering, construction, cables and wires, retails, agro products, sugar, refineries, banks, telecom, fertiliser, diversified, FMCG and automobiles have done well in Q2.

The sales growth rate for integrated steel companies was almost flat in Q2 compared with sales growth rate of over 15 per cent in Q1. Shipping companies suffered a setback with Q2 revenues down 2.08 per cent compared with revenue growth of over 15 per cent in Q1.

On the profit front, oil and gas sectors posted a modest 2.18 per cent rise in net profit in Q2 compared with a 18.6 per cent decline in Q1 net profit.

Banking too did relatively well with the Q2 net profit growing 16.96 per cent compared with a 9.17 per cent decline in net profit in Q1.

Click here for a detailed company-wise study table