Corporate profitability to decline for 3rd consecutive quarter

New Delhi, July 11 (UNI) Corporate profitability — or the earnings before interest, taxes, depreciation, and amortization (Ebitda) margin — likely remained steady in the first quarter sequentially, but fell 200-300 basis points (bps) on year, CRISIL’s analysis of over 300 companies (excluding those in the financial services, and oil and gas sectors) indicates.
That would mark the third consecutive quarter of on-year decline. Ebitda margins of almost half of the 47 sectors tracked by CRISIL Research are estimated to have contracted one year during the quarter.
Absolute Ebitda profit, too, shrank for the first time in five quarters as companies were unable to fully pass on the increase in input costs, especially of key metals and energy.
Says Hetal Gandhi, Director, CRISIL Research, “The current fiscal could see Ebitda margin contract further, to reach 19-21 percent largely due to elevated energy and metal prices. The Ukraine-Russia conflict has sent crude and natural gas prices soaring, and poses uncertainty for trade-in metals such as steel, which will lead to elevated prices of commodities and hence continued pressure on profitability.” Says Sehul Bhatt, Associate Director, CRISIL Research, “Of the total on-year incremental revenue in the first quarter of the current fiscal, nearly 54 percent was contributed by just two segments, construction-linked, and consumer discretionary products. The majority of this rise was supported by the steel and cement sectors. Of the total on-year incremental absolute Ebitda profit in the quarter, consumer discretionary products and consumer discretionary services accounted for around 60 percent, largely supported by airlines services, media & entertainment, etc.”