Corporate India's profits were under siege, now sales are also losing momentum. The results declared by 1,858 companies for the January to March 2012 quarter show that their sales expanded by just 13 per cent year-on-year compared with 21 per cent in the December quarter. Sales growth has been steadily dwindling from 28 per cent four quarters ago.

Stubborn costs

While profits for companies have been under pressure for quite some time now, weakening sales growth suggest that demand from end consumers is losing momentum. We excluded banks and finance companies from the above analysis as their cost structure is quite different.

While sales slowed, input costs for companies remained stubbornly high, taking away 56 per cent of sales in the latest quarter.

The proportion has barely changed since the June quarter and is higher than the 54 per cent a year ago.

Prices of inputs such as coal, steel, copper, polyester, palm oil and food articles have remained high for much of the past year.

Where global prices have corrected, rupee weakness has offset the gains for Indian importers.

Companies did manage to keep a tighter rein on staff and administrative costs, which fell one percentage point each, to eight and three per cent of sales in the latest March quarter.

Depreciation outgo accounted for a steadily smaller proportion of sales, dropping to 3.5 per cent by the March quarter.

This helped companies shield their net profit margins much better than operating profit margins.

Sector performance

Sectors that suffered a sales slowdown came from both the industrial and consumer segments.

Then the consumer durables sector was hit by restricted consumer demand resulting from inflation and high cost of finance.

Sales actually shrank three per cent in the March 2011-12 quarter compared to last year.

With a heavy input cost burden, operating and net profits also declined steeply.

Software saw an unexpected slowdown in the March quarter as companies reported muted deal wins and pricing pressure.

Similarly, that construction activity was at a low ebb was evident from the slower growth in construction, steel and ceramics.

The power sector too saw a deceleration, with fuel availability problems and financing woes.

Sectors in which sales growth charted gradual deterioration over the past three quarters include tyres, real estate, capital goods, metals, chemicals and textiles.

Most of these also saw a steep rise in raw material prices and consequent shrinkage in profit margins.

The bright spots for the quarter, however, came from paints, logistics, FMCGs and auto ancillaries companies which maintained momentum.

Automobiles and retail saw sales pick up in the March quarter after having been in slump for three consecutive quarters.

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