India’s consumer-focussed and industrial companies, considered bellwether sectors for the economy, expect the economic slowdown to continue even as managements remained hopeful of a recovery in the next few quarters.
- ITC: Overall slowdown in the market persists but sees rural growth reviving on a better monsoon.
- Jubilant Foodworks: Cautious approach on demand outlook.
- Marico: Liquidity issues are impacting channels but is hopeful of a recovery in the second half.
- Pidilite: Remains cautious, but expects conditions to improve.
- Titan: Growth in first half of the year likely to undershoot guidance, and shortfall won’t be made up in the second half.
- United Spirits: Demand outlook uncertain given the broader economic slowdown.
Consumer Durables
The appliance and electronics makers performed better than makers of staples to shampoos as urban demand remains relatively resilient despite uncertain rural conditions. An intense and prolonged summer aided air conditioner and refrigerator companies. But the real estate and construction slowdown hurt makers of switches, lights and electricity cable.
Outlook for the rest of the year based on conference calls and company interviews:
- Voltas: Channel inventory eased close to normal levels after sale of old stock.
- Blue Star: Macro-economic conditions are weak and visible signs of a slowdown in demand.
- Havells: Construction slowdown and a delay in fresh government projects impacting sector.
- V Guard: Didn’t change its 15 percent top line growth outlook despite the weak first-quarter earnings.
- Crompton Consumer: Confident of growth in the medium term.
Industrials
Industrial and construction companies too indicated a subdued economy and order book moved solely on account of government orders. The much-needed private capex boost remains missing.
Analysis of financials for the quarter-ended June showed margins were under pressure across the board with companies highlighting competitive pressures and weak order inflow trends. Working capital was under pressure because of tight liquidity. But that’s expected to have eased in July/August.
Here’s the outlook for the rest of the year based on conference call and management interviews:
- ABB: End markets remain sluggish and growth is being aided by exports.
- BHEL: Reported operating loss because of continuing execution challenges.
- Cummins: Cut domestic and exports guidance due to the slowdown.
- KEC International: Expressed concerns over bleak order intake.
- Larsen & Toubro: Expects private sector capex to be subdued in the next few quarters.
- NCC: Expects a flat revenue growth in FY20.
- Siemens: Sees a slowdown in capex-related ordering both on private and government side as liquidity is becoming a concern.
- Thermax: Cited weak outlook on the back of poor order flow.