The December quarter hasn't been a great period for home appliance makers in the segment of refrigerators and air-conditioners. A drop in demand and the rupee's sharp depreciation has put pressure on profit margins with prices of imported inputs increasing for these players. Whirlpool of India has reported drop in sales and profits. Voltas, Blue Star and Hitachi Home Appliances have all reported losses at the net level for the quarter.

However, listed players in the small-appliances space have seen robust sales growth. As demand was strong, most of them could pass on increases in input costs to customers. TTK Prestige, V-Guard Industries and Havells India have reported a net profit growth of 18-45 per cent. Bajaj Electricals' net profit was pulled down by the E&P business.

Good show

In the December-2011 quarter, pressure cookers, mixer-grinders, microwave ovens, juicers, fans, water heaters, electric irons, lighting products and luminaries have seen a strong demand growth.

TTK Prestige reported a 54 per cent year-on-year growth in sales in the appliances segment; growth in pressure cookers was 26 per cent and that in cookware at 51 per cent. Bajaj Electricals recorded an over 25 per cent sales growth in appliances segment and 19 per cent increase in sales in the lighting and luminaries division. Fans saw a sales growth of 14 per cent. Havells India saw sales of lighting and fixtures segment grow by 28 per cent and the sales of consumer durable items increasing by 35 per cent over last year.

Double digit sales growth for the above players came mainly from increased volumes. Price increases contributed just 5-6 per cent to growth.

Mr K. Shankaran, Director and Secretary, TTK Prestige said, “Demand for appliances has held strong. Even when inflation was hovering around 10 per cent a few months back, we didn't see a material impact on demand.” He added that people who were holding back spending on big ticket items such as air-conditioners may have actually spent money on kitchen appliances.

Some of the branded players in the appliances segment have grown on the back of market share gains from unorganised players. Mr Rajesh Gupta, Director-Finance of Havells India, said that the company's robust sales growth followed “the company's new product launches and its entry into smaller towns and acquisition of the share of the unbranded players in those markets.”

Profit growth for these players was strong too. V-Guard has maintained its operating profit margins; Havells' improved it by two percentage points. TTK Prestige saw a two percentage point drop in operating profit margins, owing to higher cost of imported goods.

Sluggish quarter

In the listed space, most players in big-ticket home appliances are focussed on air-conditioners and refrigerators. The mild summer and unusually severe winter seems to have played spoilsport in this space. Hitachi Home Appliances reported a 14 per cent drop in sales. Whirlpool of India, whose portfolio is also heavily weighted towards air-conditioners and refrigerators, saw sales drop by 1.5 per cent this quarter.

Voltas and Blue Star did manage to grow sales of their air-conditioners, but segmental profits were down sharply on input cost pressures from a weak rupee. Blue Star's cooling product segment did well on demand for air-conditioners from the non-residential segment and expansion into the tier II/III markets.

Air-conditioner and refrigerator makers import a significant percentage of the input components for their machines. The operating profits of Voltas's unitary cooling division were down 25 per cent (margin lower by three percentage points). Blue Star's cooling product division reported a 30 per cent drop in profits (margin lower by 3.5 percentage points). Though players did take price increases, they were not sufficient to cover the increase in costs.

>craji@thehindu.co.in

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