Sales growth down, but operating profits up in H1

Sales growth of private, non-financial sector businesses decelerated to 12.3 per cent in the first half of 2012-13 from 17.2 per cent in the second half of FY12. The deceleration in sales growth was seen across the manufacturing, IT and non-IT services sectors, according to a new data series brought out by the RBI.

An analysis of the performance of 2,832 listed non-government, non-financial companies shows that operating profits growth was modest at 4.9 per cent in the first half of the current financial year, compared to a decline of 1.6 per cent in the second half of 2011-12. Net profits of these companies went up by 4.3 per cent on account of “other incomes”, reversing the declining trend witnessed in the previous two years.

Profitability in terms of EBITDA margins and net profit margins as a percentage of sales was also higher in the first half of 2012-13 vis-à-vis the second half of 2011-12. What is more, even though expenditure growth outpaced sales growth from the first half of 2010-11 onward, the reduced gap between sales and expenditure growth led to a slight improvement in profit margins in the first of 2012-13 after continuous contraction since the second half of 2010-11.

In line with sales, expenditure on major heads such as consumption of raw materials also grew at lower rates, resulting in modest growth in operating profits as measured by EBITDA during the first half of the current financial year.

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