Corporate profits to grow by only 7% in FY 11: CMIE

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Mumbai, Jan 16 (PTI) Corporate India is expected toreport only a seven per cent rise in net profits due toslowdown in profit growth of manufacturing sector during FY11, according to Centre for Monitoring Indian Economy (CMIE).

The corporate India''s expected seven per cent rise innet profit is much lower than the 29 per cent growth in netprofits clocked in FY 10. The main culprit behind the slowdownin profit growth will be the manufacturing sector. Its netprofits are expected to fall by 2.1 per cent in 2010-11, asthe companies try to partially absorb the sharp increase inraw material prices and wage bill, CMIE said in a report.

The financial services and non-financial servicessectors are expected to report 24.6 per cent and 12.5 per centincrease in net profits, respectively, it said.

In fact, corporate India is expected to do better onthe sales front in FY 11. Growth in corporate sales inexpected to accelerate to 18.8 per cent in FY 11 from a meagersix per cent in FY 10, the research agency said.

The sales growth during the year will be mainly drivenby the 20.2 per cent rise in sales of the manufacturingsectors. Sales of the financial services sector are expectedto grow by 17.2 per cent and that of the non-financialservices sector by 16.2 per cent.

CMIE expected corporate sales to grow by 18.5 per centin the March 2011 quarter. However, a meager one per centgrowth in the other income is expected to restrict the growthin corporate profits to 14.5 per cent. .

Net profits of the financial services sector are expected to grow by a robust 29 per cent and that of thenon-financial services sector by 20.3 per cent. However, asedate 8.4 per cent growth in net profits of the manufacturingsector is expected to pull down the growth in corporateprofits during the quarter, the report said.

Net profit of the manufacturing sector, excludingpetroleum product companies, have either fallen or grownslower than sales since the beginning of the current financialyear because of the rising input costs, it said.

"We expect the sector to continue to feel the heat ofthe rising raw material and fuel prices in the last quarter ofFY 11 too."

Raw material expenses are expected to rise by 19.3 percent and fuel expenses by 19.9 per cent. This will restrictthe growth in the net profits of the sector to 8.4 per cent inQ4 FY 11.

The steel industry is expected to report a 3.3 percent fall in net profits in absence of a complete pass on ofthe increase in iron ore and coking coal prices. Even a small3-5 per cent hike in steel prices in January 2010 is expectedto affect the profit performance of the user industries.

The automobiles and steel pipes industry is expectedto report a 14.3 per cent and 12.5 per cent fall in netprofits. The tyres and cement industry is expected to report9-11 per cent fall in net profits due to a rise in inputcosts, CMIE said.

Net profits of the financial services sector are expected to grow by a robust 29 per cent and that of thenon-financial services sector by 20.3 per cent. However, asedate 8.4 per cent growth in net profits of the manufacturingsector is expected to pull down the growth in corporateprofits during the quarter, the report said.

Net profit of the manufacturing sector, excludingpetroleum product companies, have either fallen or grownslower than sales since the beginning of the current financialyear because of the rising input costs, it said.

"We expect the sector to continue to feel the heat ofthe rising raw material and fuel prices in the last quarter ofFY 11 too."

Raw material expenses are expected to rise by 19.3 percent and fuel expenses by 19.9 per cent. This will restrictthe growth in the net profits of the sector to 8.4 per cent inQ4 FY 11.

The steel industry is expected to report a 3.3 percent fall in net profits in absence of a complete pass on ofthe increase in iron ore and coking coal prices. Even a small3-5 per cent hike in steel prices in January 2010 is expectedto affect the profit performance of the user industries.

The automobiles and steel pipes industry is expectedto report a 14.3 per cent and 12.5 per cent fall in netprofits. The tyres and cement industry is expected to report9-11 per cent fall in net profits due to a rise in inputcosts, CMIE said.

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