A large number of Indian companies managed to beat sluggish demand conditions to post higher profit margins in the fourth quarter of last fiscal, helped by a pronounced fall in raw material prices.
A study conducted by ETIG, which analysed the financial results of 1,500 companies for the March quarter, found that input costs relative to net sales dropped by 6% to 24.8% during the period from year-ago levels. The drop has been more pronounced over the last two quarters as the figure for the September 08 quarter was 32%.
How this has effected the companies’ top lines or bottom lines is critical. Take the case of ITC. Raw material costs accounted for 40% of the cigarettemaker’s total income in the March quarter of 2009, compared with the figure of 46% in the year-ago period. Consequently , operating profit margins climbed by a handy 4.5% to 33%. Net profit too gained 2.3% to 20% of the total income.
This is pretty much the case also with India’s largest fast-moving consumer goods company Hindustan Unilever Limited (HUL). Raw material cost for the company dropped from 53.3% of its net sales in the March quarter last year to 51.7% in the same quarter this year. “Drop in raw material prices during the March quarter has helped in improving our operating profit margins,” said HUL’s chief financial officer D Sundaram recently while announcing the company’s financial results.
Pharma companies too benefited from a fall in input prices. For Cipla, raw material cost as a percentage of net sales decreased by nearly 7% during the March quarter, largely on account of favourable exchange rates and changes in its product mix. Of course, the sharp fall in crude oil prices from $147 per barrel to less than $40 during the period also helped these companies.
JSW Steel’s raw material costs as a percent to net sales increased to 74% from 54% a year ago. “We have had an inventory pile up over the last two quarters. Though sales realisations have dropped, that has been partly offset by the fall in raw material prices,” said company’s joint managing director Seshagiri Rao.
Analysts feel that the downward trend in raw material costs may not continue. “For the current quarter, we will again see the raw materialcosts coming down on an year-on-year basis. Beyond this, we do not see input costs remaining low,” said VK Sharma, director and head of research , Anagram Capital. “From the September quarter , we see costs climbing as the increased liquidity is once again expected to push up commodity prices,” he added.
Raw facts
Financial results of 1,500 companies for the March quarter were analysed and it was found that input costs dropped by 6% to 24.8% during the period from year-ago levels ITC’s raw material costs accounted for 40% of the total income in the March quarter of 2009, compared to 46% in the year-ago period Hindustan Unilever’s input costs dropped from 53.3% of its net sales in the March quarter last year to 51.7% in the same quarter this year Cipla’s input cost as a percentage of net sales decreased by 7% in March quarter JSW Steel’s raw material costs as a percent to net sales increased to 74% from 54%
A study conducted by ETIG, which analysed the financial results of 1,500 companies for the March quarter, found that input costs relative to net sales dropped by 6% to 24.8% during the period from year-ago levels. The drop has been more pronounced over the last two quarters as the figure for the September 08 quarter was 32%.
How this has effected the companies’ top lines or bottom lines is critical. Take the case of ITC. Raw material costs accounted for 40% of the cigarettemaker’s total income in the March quarter of 2009, compared with the figure of 46% in the year-ago period. Consequently , operating profit margins climbed by a handy 4.5% to 33%. Net profit too gained 2.3% to 20% of the total income.
This is pretty much the case also with India’s largest fast-moving consumer goods company Hindustan Unilever Limited (HUL). Raw material cost for the company dropped from 53.3% of its net sales in the March quarter last year to 51.7% in the same quarter this year. “Drop in raw material prices during the March quarter has helped in improving our operating profit margins,” said HUL’s chief financial officer D Sundaram recently while announcing the company’s financial results.
Pharma companies too benefited from a fall in input prices. For Cipla, raw material cost as a percentage of net sales decreased by nearly 7% during the March quarter, largely on account of favourable exchange rates and changes in its product mix. Of course, the sharp fall in crude oil prices from $147 per barrel to less than $40 during the period also helped these companies.
JSW Steel’s raw material costs as a percent to net sales increased to 74% from 54% a year ago. “We have had an inventory pile up over the last two quarters. Though sales realisations have dropped, that has been partly offset by the fall in raw material prices,” said company’s joint managing director Seshagiri Rao.
Analysts feel that the downward trend in raw material costs may not continue. “For the current quarter, we will again see the raw materialcosts coming down on an year-on-year basis. Beyond this, we do not see input costs remaining low,” said VK Sharma, director and head of research , Anagram Capital. “From the September quarter , we see costs climbing as the increased liquidity is once again expected to push up commodity prices,” he added.
Raw facts
Financial results of 1,500 companies for the March quarter were analysed and it was found that input costs dropped by 6% to 24.8% during the period from year-ago levels ITC’s raw material costs accounted for 40% of the total income in the March quarter of 2009, compared to 46% in the year-ago period Hindustan Unilever’s input costs dropped from 53.3% of its net sales in the March quarter last year to 51.7% in the same quarter this year Cipla’s input cost as a percentage of net sales decreased by 7% in March quarter JSW Steel’s raw material costs as a percent to net sales increased to 74% from 54%
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