Strong order inflows and on track project execution have helped the company post a 26 per cent jump in revenues in the June quarter. However, steep increase in costs dented the operating margins, which slipped to 9.1 per cent, a 3 percentage point drop sequentially.
Pick up in infrastructure orders helped L&T grow its order book by 21 per cent during the quarter, after a 12 per cent drop in 2011-12. , Increase in material and construction cost by 32 per cent, staff costs by 27 per cent, coupled with marked-to-market loss led to the fall in operating margins. With cost pressures unlikely to abate in the near term, margins may remain under pressure for some more time.
HUL registered a 27 per cent jump in operating profits despite higher advertising expenses. Operating profit margins increased by 1.3 percentage points to 13.1 per cent in the June quarter, helped by lower material and other costs. 9 per cent volume growth enabled HUL clock 13.7 per cent growth in sales. Soaps and detergents and personal products witnessed 24 and 17 growth per cent respectively during the quarter compared to the same period last year. Packaged foods segment after a hietus of three quarters registered a 17 per cent growth last quarter. . Efforts to push premium brands such as Bru range helped the beverage segment register a three percentage point increase in margins to 15 per cent during the same period.
Stiff competition across most categories resulted in increased ad spends. Given HUL’s dominance in categories such as soaps, detergents and personal products, higher ad spends may push other consumer companies to follow suit.
Wipro lags peers
All is not well with Wipro. The company’s performance lagged its peers TCS and Infosys across several key parameters in the June quarter. Despite a marginal 0.8 per cent growth in volumes, revenues declined by 1.4 per cent sequentially in dollar terms, on the back of 2 percentage point drop in realisations . The decline in key verticals such as finance solutions, retail and transportation was steeper than the overall revenue decline. Telecom, energy and utilities also fell albeit at a slower pace. Manufacturing bucked the trend and grew a tad. In terms of geographies, Americas was the key laggard though skimpy growth in Europe helped Wipro arrest revenue decline to an extent. While the company managed to add one customer in the $100-million category, it lost two customers in the $75-million category on a sequential basis. However, the saving grace for the company is that its top 10 clients grew and repeat business proportion stood at a healthy 99.3 per cent. This is a testimony to the company’s ability to mine key customers.