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Profitability for CE brands takes a hit in India

Three of the world’s largest consumer electronics brands – Apple, Samsung and LG – have reported pressure in profit of the India business in financial year 2021-22 (FY22), which industry executives said is due to all-time high component and commodity costs while ensuring competitive pricing to continue their pace of revenue growth in the country.

As per the latest regulatory disclosures to the Registrar of Companies (RoC), LG Electronics’ net profit in India declined by 23% to ₹1,174 crore in 2021-22 and that of Samsung Electronics fell 4.9% to ₹3,844 crore. Apple, which has been growing its net profit in India at a high double-digit pace, saw an almost flat year in FY22 – net profit rose 3% to ₹1,263 crore. Apple’s net profit here had soared 32%in FY21 ona revenue growth of 68%.

Apple, Samsung and LG India did not give any reason in their regulatory disclosures behind their slower profitability for the India business. LG India’s sales crossed the $2-billion-mark in FY22 at ₹17,171 crore, a 10% surge over the previous year, while that of rival Samsung rose 8.6% to ₹82,451 crore, touching the $10-billion milestone. Apple’s India sales jumped 45% to ₹33,381 crore, crossing the $4-billion mark.

Mohit Yadav, founder at business intelligence firm Altinfo, said the increase in the cost of inputs along with relatively slower pace of growth has led to lower-than-expected profitability. “Since these are macro factors with companies having limited control over them, companies will need to come up with innovation in both product and outreach to increase growth,” he said.

Tarun Pathak, research director at market tracker Counterpoint Research, said profitability took a hit in India due to the high base effect of previous year when pent-up demand was super high, high component costs amidst shortages and overall macroeconomic challenges.

The overall demand environment in India has continued to remain stressful last fiscal due to repeated Covid waves and inflationary pressure on consumer wallets.

Samsung – the second largest foreign consumer goods manufacturer in India after carmaker Maruti Suzuki – is the largest mobile phone brand in India by sales and leads the overall television market. LG is the country’s largest home-appliance maker by revenue.

Apple leads the premium smartphone segment in India and there has been no impact on its revenue growth, unlike competitors, during the pandemic as consumers shifted to premium devices expecting them to last longer. Pehal News

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