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Vidya Bala

Corporate India’s net profits in the fourth quarter were slightly better compared with the immediately preceding quarter.

A performance review of quarterly results of a large sample of 715 companies (excluding banks and financial institutions) in the listed universe reveals this.

For the quarter ended March 2009, sales declined by 1.4 per cent, while net profits were higher by 23 per cent, compared with the December 2008 quarter.

This may well be the early signs of a turnaround in corporate fortunes, although seasonal (year-on-year), rather than the sequential, comparisons are the norm.

Note that in the quarter ended December 2008, sales had declined by 7.7 per cent while adjusted net profits were lower by 14 per cent compared with the September quarter.

Cost savings appear to have been a key factor that aided profit growth despite faltering sales.

Indian companies have managed to contain costs across various fronts. While the effect of falling commodity prices began to be visible in the raw material costs of December quarter itself, power and fuel costs have also seen a significant decline in the latest March quarter, even as material costs continued to trend down. Cement companies have been the major beneficiaries of this trend.

A good number of others, especially IT companies such as Wipro, Tech Mahindra and Polaris Software, witnessed a sharp decline in their employee expenses/selling and administrative expenses (S&A).

Overall, while raw material costs declined by a marginal 2.2 per cent and S&A expense dropped by 7.3 per cent, power and fuel dipped by a significant 19 per cent compared to December.

Lower costs propped up sequential operating profits by 23 per cent in the March quarter compared with a dip of 18 per cent witnessed last quarter. The expansion in operating profits as well as decline in interest costs helped net profit growth.

Net interest cost for the quarter was lower by 20 per cent compared with December on the back of a softening interest rate regime.

However, this picture could well change as the results of companies from sectors with high leverage are yet to be published.

It may be noted that on a year-on year basis, the March quarter numbers remained sedate with a 0.1 per cent decline in sales with net profits lower by 2.2 per cent.

For a majority of listed companies, March 31 is also the last date for the close of the financial year and hence, the results season stretches until June 30 with companies preferring to disclose audited results a little later rather than unaudited ones. Also, a number of companies from sectors such as metals, engineering and real estate are yet to announce their results.

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