With the earnings season coming to an end, it is clear India Inc is making a recovery with the consumer pack leading the way. Results for Q4FY18 come off a favourable base — Q4FY17 was the first full quarter post-demonetisation — and have been just about in keeping with expectations. The aggregate numbers —top-line growth in particular — are skewed by the presence of several heavyweight commodity players; elevated prices of metals, crude oil and other commodities have driven up revenues. However, for users, the higher input costs have pressured margins. Nonetheless better consumer spends have driven up sales of both durables and staples as reflected in the volumes for cars, two-wheelers and consumer staples. The pick-up in rural demand is visible. The management at Hero MotoCorp, for instance, believes the demand outlook is encouraging and that the two-wheeler industry should report a volume increase of 9-10 per cent in 2018-19. Hindustan Unilever reported a strong set of numbers with the volumes up 11 per cent y-o-y. At Tata Motors, the management attributed the miss in standalone operating margins partly to commodity cost increases. For a sample of 942 companies (excluding banks and financials), revenues have risen 15 per cent not overly impressive in these inflationary times. With the increase in expenditure outpacing that in the top-line, operating profit margins have contracted slightly. If Tata Steel and Vedanta are excluded from the sample, the rise in net profits is 14.5 per cent year-on-year, much smaller than the 22 per cent in Q3FY18. Among the bigger disappointments has been Tata Motors whose profits were down 66 per cent year-on-year thanks to some impairments following changes in the accounting policy. Jaguar Land Rover, which is facing headwinds in its key markets such as the UK and Europe reported revenues that were up just 4 per cent y-o-y. Nevetheless, pricing power is returning to several players. Ashok Leyland’s average selling price during the March quarter was higher by around 12-13 per cent year-on-year and indicates better demand for trucks on the back of a pick-up in construction and mining activity. Siemens’s like-for-like order inflows dropped 4 per cent in the quarter and analysts say the management does not see a pipeline of large projects. CEAT reported results below expectations due to a weaker mix as replacement volumes were slower with the company not able to take a price increase in the two-wheeler segment given increase in competitive intensity. Decorative paints business at Asian Paints reported double digit volume growth, after three quarters of single-digit growth. Arvind Limited reported a smart 16 per cent y-o-y increase in revenues which drove up the operating profits. Volumes for Godrej Consumer’s branded products were up a reasonably good 7 per cent. FE
