With close to 500 companies reporting losses, the highest number in at least five quarters, the earnings season has been a big disappointment. Save for a clutch of metals producers, which swung from loss to profit, most companies have struggled to grow their top lines in a weak economy.
In an environment in which raw material prices have risen, albeit moderately, cash flows have been crimped. For a sample of 1,893 companies (excluding banks, financials, OMCs, metal producers and Reliance Industries), net profits fell nearly 15 per cent y-o-y in the three months to March with revenues rising at sub-5 per cent y-o-y.
Consumer spends are on a leash; Jubilant Foodworks and Shoppers Stop reported poor same store sales while at Britannia revenues grew just six per cent y-o-y. Telcom firms’ bottom lines have been battered in a tariff war; profits at Bharti Airtel crashed.
In a quarter in which the impact of demonetisation was severe, volumes were hard to come by and pricing power nearly absent. At ACC operating margins contracted by 190 basis points due to costlier power, fuel and freight while at Hero MotoCorp, operating margins were dented by higher input costs.
Capital goods makers such as BHEL reported subdued order flows and its revenues fell 3 per cent y-o-y in Q4FY17. At Coal India, realisations were weak even as costs rose.