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ShareMumbai: A decline in raw material costs helped engineering companies expand their operating profit margins in the September quarter.
Bharat Heavy Electricals saw operating margin increase 338 basis points to 18.31%, as raw materials costs as a percentage of revenues declined 204 basis points due to lower cost inventory. The benefits are expected to continue in the second half of the fiscal as well. Total operating revenues increased 23.5%, driven by the power business. Lower excise duty of 4% vis-a-vis 8% last year also fuelled revenue growth. Net profit increased 39%, boosted by strong operating performance.
Larsen and Toubro's operating margin expanded by 135 basis points to 10.57%. The company maintains that judicious de-risking strategies along with efficient treasury operations helped operating performance. Margins of electricals & electronics business improved 362 basis points to 14.95% due to lower input prices and better product-mix.
The company's revenues increased 6.07% adjusting for revenues from ready mix concrete business. This was below street estimates. Delay in clearances from clients in some infrastructure projects impacted revenue growth. Further, off-take in industrial products and machineries business fell, resulting in a 26% drop in revenues from the business. The company's net profit increased 26%, helped by higher other income.
Crompton Greaves saw operating margin increase 300 basis points to 14%, driven by savings in raw material and overhead costs. Revenues increased 4.6%, impacted by slower growth in power and industrial businesses. Analysts attribute subdued performance of the power systems segment to cyclone hitting the company's testing lab in Bhopal in June quarter. Revenues from consumer business, though, grew 24%. Net profit increased
61%, driven by strong operating performance, lower interest and tax outgo.
ABB's results were sharply below street expectations and operating margin fell 169 basis points to 9.4% due to higher competition from both domestic and foreign players, leading to a decline of around 20% in prices of substation orders. Also, raw material cost as a percentage of revenues increased 96 basis points. Revenues dropped 5.6% due to slower revenue growth across all business segments. Net profit fell 20.7%.
