It could have been worse but other income, mainly boosted by exchange rate benefits, provided much-needed respectability.
In the end, as many as 496 companies that have declared their results for the quarter ended June 30, 2007 have posted a 17.2 per cent rise in sales and 28.4 per cent rise in net profit.
However, if one were to exclude other income, which grew by 98 per cent, profit growth would fall to a more modest 13.2 per cent. In the previous four quarters, the net profit figure would have shot up if other income was excluded.
The total expenditure of the firms increased 18.3 per cent or 110 basis points higher than the revenue growth of 17.2 per cent. In all the other four quarters, growth in sales was higher by around 100 basis points compared with a rise in total cost of production.
Despite an increase in production costs, operating margins were higher than the three preceding quarters, but were lower year-on-year.
It is early to comment on the quarterly performance as results from oil and gas, oil marketing, automobiles, construction, fast-moving consumer goods, auto ancillaries, textiles and chemicals are still awaited.
The performance of oil marketing companies and automobile firms are likely to disappoint. Fast-moving consumer goods and auto ancillaries firms are likely to see modest growth.
The sectoral trend so far matches market expectations.
Software services companies posted a lower growth rate in sales and profits due to the strengthening rupee. The profit growth rate of cement companies is down 56.8 per cent against 194 per cent in the corresponding period last year. Growth in profit moves down to 27.7 per cent if other income is excluded.
Motorcycle makers sales declined on account of the rising cost of borrowings. Their profits were down 17 per cent owing to a rise in the cost of production and offering freebies to capture market share. The low demand for automobiles affected auto ancillaries, which registered sales growth of 17.2 per cent and profit growth of 20.2 per cent.
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