ITC's post-tax profit for the Quarter ended 30th June, 2005 registered a growth of 20.1% to Rs. 558.30 crores, while pre-tax profit at Rs. 830.14 crores posted a growth of 21.8%, both these profit levels being the highest ever declared in any quarter. Earnings per share for the Quarter stood at Rs. 22.38. Viewed in the context of the base effect (tax refund of Rs.25 crores in the same quarter last year) the growth in post tax profit is even more commendable.

The Company's Net Turnover at Rs. 2266.88 crores registered a robust growth of 24.7% driven by Cigarette sales, ramp up of the Foods business, higher exports of leaf tobacco and improved performance of the Hotels and Paperboards, Paper & Packaging segments. The non-cigarette topline which now accounts for 44% of the Company's Net Turnover, grew by 39% during the quarter.

FMCG

Branded Packaged Foods

The Company's Branded Packaged Foods business continued to expand rapidly. In the Biscuits category, the 'Sunfeast' range made impressive gains. 'Sunfeast Dark Fantasy', a dark chocolate and vanilla cream offering, which was extended to select markets, has redefined the premium segment and further strengthened the Company's quality reputation. During the quarter, the Sunfeast range was further expanded with the launch of 'Sunfeast Snacky' salted crackers in 2 unique variants viz., Chilli Flakes and Classic Salted. The business is gearing up for the launch of a slew of differentiated products while simultaneously establishing outsourced and distributed manufacturing capacities to garner rapid volume growth in this category. 'Sunfeast Pasta Treat', a whole wheat based non-fried product, was introduced as a healthy snacking option for children in 4 exciting flavours. The product has met with encouraging response from consumers. The Company has signed up superstar Shah Rukh Khan as the brand ambassador for Sunfeast. This association is expected to yield significant value addition by reinforcing the brand attributes and reiterating the 'spread the smile' positioning.

The quarter also marked the Company's foray into the branded spices market under the 'Aashirvaad' brand, leveraging the strong brand association with superior quality and consistency. Product extension is currently underway to target markets in the North and West. 'Aashirvaad' Atta continued to gain increasing consumer acceptance, further consolidating its position as the clear market leader amongst national branded players.

Lifestyle Retailing

The 'Wills Lifestyle' range vitality was further strengthened with the introduction of a large number of style and colour options in the 'Wills Classic' and 'Wills Clublife' categories. The business is in the process of reformulating its retail presence in keeping with the emerging retailing landscape in the country by establishing/relocating stores in high traffic Malls. The 'Wills' range is now available in 35 large format retail stores and 68 multi-brand outlets apart from the 40 exclusive 'Wills Lifestyle Stores'.

The distribution reach of John Players, the mid-market brand, was further strengthened during the quarter. The brand is now available in 40 Exclusive Brand Outlets and nearly 1300 Multi-brand and high traffic outlets. The stylish summer collection has significantly reinforced the brand's "comfort dressing" positioning.

Greeting, Gifting & Stationery

The business made impressive gains in the Stationery market with the 'Classmate' and 'Expressions Paperkrafts' range of products gaining increasing consumer franchise. Backed by a strong distribution network, the Company's products currently reach out to nearly 600 markets across 11500 outlets. The business also made significant gains in respect of the Greeting cards business with Card volumes growing nearly 10% over the same period last year. The 'Expressions' range of Greeting cards consolidated its leadership position in multi brand outlets in key markets in the South and East.

Safety Matches

Volumes were successfully ramped up during the quarter through continued focus on product quality, enhanced supply chain capabilities and distribution reach. The popular brand 'AIM' further consolidated its position as the single largest match brand in the country, significantly enhancing the Company's market standing. Product portfolio was also expanded with the launch of 'AIM' Veneer in Kerala. Buoyed by the strong growth in sales, the business is embarking on exports of value-added products to discerning markets in Europe, Africa and the USA.

The recent acquisition of WIMCO by the Company's wholly owned subsidiary Russell Credit Ltd. will yield synergy advantages, apart from catalysing fresh investments in the company with attendant benefits to all stakeholders. The synergy benefits will better position ITC to continue to add value to manufacturers in the small-scale sector through technical and management support to help them achieve superior product quality and processes.

Agarbattis

ITC continues to partner with small and medium enterprises to help them raise their quality and process standards. 'Mangaldeep' is fast emerging as the only national brand in an industry dominated by multiple local brands.

Cigarettes

The Cigarettes industry continued to operate in a challenging environment especially in view of the severe restrictions on advertisement and communication brought about with the implementation of the 'Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act, 2003' (COTPA) with effect from 1st May 2004 and ratification of the Framework Convention for Tobacco Control, of which India was one of the first signatories. Excise duty rates were also increased by as much as 10% for cigarettes in March 2005. Cigarettes continue to be subjected to multiplicity of taxes at the Central and State levels. The constitutionality of the levy of entry taxes by the States is presently before a Constitution Bench of the Supreme Court. A judgement favourable to industry will be in consonance with the taxation philosophy underlying the concept of VAT, namely the elimination of the cascading impact of multiple taxes.

The Company continues to leverage its focus on world class quality to enhance its market standing and sustain its leadership position in the industry.

HOTELS

Segment revenues at Rs. 147 crores grew by 35.5% over the same period last year on the back of improved room realisations and occupancies across properties. ITC Grand Central, the Company's second hotel in Mumbai, posted a cash profit in its first full quarter of operations. ITC Sonar Bangla continued to make significant gains during the quarter and consolidated its position as the revenue leader in Kolkata.

A comprehensive renovation and product upgradation programme is also underway at various hotels in keeping with the Company's strategy of maintaining the contemporariness of its properties.

The long standing litigation with the owners of Searock hotel in Mumbai was resolved in a mutual settlement, resulting in a one time income of Rs.26.77 crores during the quarter.

PAPERBOARDS, PAPER & PACKAGING

Sales of value added paperboards grew 39% over the same period last year, further enriching the product mix. These products now comprise over 55% of paperboard sales. Significant progress was also made during the quarter towards capacity expansion in the recycled segment with the scaling up of production at the Kovai unit in Tamil Nadu and the new 75,000 TPA line (PM V) at Bhadrachalam, Andhra Pradesh which commenced operations in January 2005.

The Company's Elemental Chlorine Free (ECF) pulp mill is the only one of its kind in the country meeting world-class environmental standards. With increasing awareness of hygiene and safety among Indian consumers, industries like foods and pharmaceuticals are progressively switching to ECF pulp-based paperboard.

Recent investments in state-of-the-art technology in the packaging business have begun delivering substantial savings to the ITC system through in-house manufacture of high-end packaging products.

AGRI BUSINESS

The e-choupal network was further ramped up to 5263 installations, reaching out to over 3 million farmers in the states of Madhya Pradesh, Uttar Pradesh, Maharashtra, Rajasthan, Karnataka and Andhra Pradesh.

The Company's first rural mall, christened 'Choupal Sagar', inaugurated in August 2004 at Sehore, MP continued to attract high levels of footfalls and sales. Construction of 10 more 'Choupal Sagars' is underway with the ones at MHOW and Vidisha, both in MP, expected to be operational shortly. Such malls, in synergistic combination with the E-choupal network would serve as the core infrastructure to support ITC's rural distribution strategy.

Agri Business revenues grew by 64% driven by wheat, non-basmati rice and leaf tobacco.

The Board of Directors, at its meeting held in Kolkata on 29th July, 2005 approved the financial results for the quarter ended 30th June, 2005, which are enclosed.

Notes :

Limited Review

The Limited Review, as required under Clause 41 of the Listing Agreement has been completed and the related Report forwarded to the Stock Exchanges. This Report does not have any impact on the above 'Results and Notes' for the Quarter ended 30th June, 2005 which needs to be explained.

Notes