ITC concluded yet another year of satisfying results despite a challenging economic environment. Gross Turnover grew by an impressive 13% to Rs. 9840 crores. Post-tax profit increased by 18% to Rs.1190 crores, while Pre-tax profit at Rs.1780 crores registered a growth of 11%. Focus on the efficiency of capital deployment contained the increase in Net Assets Employed to a mere 7% including the impact of amalgamation of the paperboards business and the strategic capital outlays towards attaining international competitiveness. Net cash flows from operating activities at Rs.1770 crores represent an increase of 79%. These cash flows also enabled significant debt retirement, leading to further reduction in interest costs.

The Board of Directors recommended a dividend of Rs.13.50 per share subject to deduction of income-tax (previous year: Rs.10.00 per share). The proposed Dividend for the financial year ended 31^st March, 2002 includes dividend payable on the new Ordinary shares of the Company, issued and allotted to the shareholders of erstwhile ITC Bhadrachalam Paperboards Ltd,, which rank pari passu in all respects with the existing Ordinary shares of the Company, in accordance with the Scheme of Amalgamation of ITC Bhadrachalam with the Company.

Impact of amalgamation

The financial results for the year ended 31^st March, 2002 include that of the erstwhile ITC Bhadrachalam Paperboards Limited (ITC Bhadrachalam) which was amalgamated with the Company upon the Scheme of Amalgamation becoming effective on 13^th March 2002 and operative from 1^st April, 2001. The amalgamation contributed an incremental Rs. 511 crores to the Company’s Gross Turnover, after excluding inter-divisional sales. Cash Profits from operations (PBDIT) increased by Rs. 101 crores, while Operating Profits (PBIT) grew by Rs.59 crores as a result of the amalgamation. The aggregate increase in Capital Employed consequent to the amalgamation amounted to around Rs. 281 crores only. The amalgamation thus has enhanced the Earnings per Share. The integration of the paperboards business is also expected to result in significant operational synergies.

Underlying growth

Net of adjustment for the impact of the amalgamation and other one-off items, namely, income-tax refunds and reversal of provisions upon fulfilment of export obligations, the underlying growth in Company performance was robust. The underlying growth in Gross Turnover for the year was 7.5% and in Post-tax profits a healthy 22%. This performance is even more satisfying as it has been achieved despite severe cost and revenue pressures stemming from a steep increase in cigarette taxes, the tobacco crop holiday in Andhra Pradesh, the gestation of new hotel investments and the incubation costs of new businesses.

FMCG

The steep increase of 15% in excise duties compounded by the continuing increases in State level taxes and the growing menace of contraband led to Domestic Cigarette industry volumes declining by about 11% during the year. On the strength of superior competitive capability and market standing, ITC contained its domestic volume decline to 8%. The Company continues to upgrade the quality of its products to provide world class products to the Indian consumer. The prestigious India Kings brand was extended to a Lights version in the ultra premium beveled edge packaging. Based on ongoing market research, two of the Company’s cigarette brands were successfully extended into new and innovative flavour options.

During 2001-02 the Lifestyle Retailing business scaled up its operations to 42 exclusive Wills Lifestyle stores across 35 cities in the country. The state-of-the-art Design and Technology Centre at Gurgaon is now complete and is expected to significantly shrink time-to-market and optimise conversion costs through reduced wastage. The business’ internationally benchmarked quality earned industry recognition, with Wills Sport winning the "Most Admired Brand Launch of the Year" award and Wills Lifestyle winning the "The Most Admired Exclusive Retail Chain of the Year" award at the Images Fashion Awards 2001.

The Greeting Cards business continued to expand its reach. New partnerships were entered with SOS Children’s Villages of India for social cause cards, with Intercontinental Greetings, USA for designs and with Maple Leaf, Mumbai for speciality cards.

During the year, ITC made an entry into the Branded Packaged Foods industry by launching ready-to-eat gourmet foods under the brand ‘Kitchens of India’. The premium products under this umbrella brand feature ethnic, signature recipes from ITC-Welcomgroup. The market response has been encouraging. ITC also acquired the "mint-o" trademark in the confectionery segment. The related pre-launch product development work is under way.

Hotels

The Hotels and Tourism industry was severely affected by the unfortunate events of September and December 2001 and the general slowdown in the global economy. ITC Grand Maratha, which became fully operational in September 2001, clocked cash profits within four months of commencement of full operations. The ITC Hotel Sonar Bangla at Kolkata is expected to commence commercial operations by end 2002. The ITC Grand Central project which was slowed down temporarily pending statutory approvals, is now likely to open towards the end of 2003.

Paperboards, Paper and Packaging

The Bhadrachalam Paperboards Division continued to focus on technology upgradation, and market expansion for value added products, and benchmarking of quality and operating standards to international levels. This strategic focus enabled the business to significantly improve performance despite a global slowdown in demand and the resultant fierce price competition. Overall sales of value added products grew by nearly 18%, thereby enriching the product mix. The Rs. 227 crore pulp mill modernisation and upgradation project at the plant at Bhadrachalam is progressing as per schedule and is expected to be fully operational by October 2002. The commissioning of the project will significantly enhance the cost competitiveness of the Division and also enable it to achieve world class environmental compliance standards. The Division’s farm forestry programme, aimed at improving access to cost effective fibrous raw materials, made further progress with the distribution of nearly 3.4 million high yielding disease resistant "Bhadrachalam" clonal saplings to growers in the economic vicinity of the mill.

Operations at the Packaging and Printing Division’s Tiruvottiyur factory resumed from 21^st January 2002, with workmen in increasing numbers calling off their strike after agreeing to abide by statutory regulations and the Memorandum of Agreement signed between the workmen and the management. During the strike, uninterrupted supply of packaging to the cigarette business was secured through stepped-up operations at the Munger factory and outsourcing the balance requirement largely from international manufacturers.

Agri Business

Leaf tobacco exports (Rs. 171 crores) were maintained at nearly the same levels as that of 2000-01, despite the crop holiday declared by the Tobacco Board in Andhra Pradesh and the continuing oversupply situation in the global markets. The creative harnessing of Information Technology across the value chain enabled the Company to substantially increase its exports of other agri-commodities by over 48% during 2001-02 (Rs 535 crores against Rs 361 crores last year). The benefits of the unique web-based e-Choupals, which operated at a critical mass scale for the first time during the soya season of 2001-02, have testified to the assumptions behind efficiency gains through virtual integration of the supply chain. Encouraged by the results, this model is being rapidly scaled up and replicated across other locations and commodities.

The Board of Directors, at its meeting in Kolkata on 22^nd May, 2002, approved the financial results for the year ended March, 2002, which are enclosed.
 

Notes :

(i) The above results were approved at the meeting of the Board of Directors of the Company held on 22nd May, 2002.

(ii) Figures for the previous year have been re-arranged wherever necessary.

(iii) Gross Income comprises of Segment Revenue and Other Income.

(iv) In accordance with the Scheme of Amalgamation of the erstwhile ITC Bhadrachalam with the Company as sanctioned by the Hon'ble High Courts at Kolkata and Hyderabad on 24th January, 2002 and 8th February, 2002 respectively, the assets and liabilities of the erstwhile ITC Bhadrachalam vested in the Company with effect from 1st April, 2001. The Scheme has accordingly been given effect to in these accounts, and it's impact reflected in the "Quarter Ended 31.3.2002" and "Twelve Months Ended 31.3.2002" columns above.

(v) The Tiruvottiyur factory of the Packaging business which was on strike from 13th November, 2001, resumed operation from 21st January, 2002.

(vi) The Provision for Taxation includes the impact of deferred tax.

(vii) The Company has recorded a cumulative net deferred tax liability of Rs. 57.32 crores upto 31st March, 2001 as a reduction from General Reserves. This adjustment has not been reflected in the "Twelve months ended 31.3.2001" column above which remains as per the audited accounts.

(viii) The above is as per Clause 41 of the Listing Agreement and does not take into account the excise issues disputed by the Company.
 

Notes :

(i) The above was approved at the meeting of the Board of Directors of the Company held on 22nd May, 2002.

(ii) Figures for the previous year have been re-arranged wherever necessary.

(iii) The Board of Directors of the Company has recommended a dividend of Rs.13.50 per Oridinary share for the financial year ended 31st March, 2002 and the dividend, if declared, will be paid on or after 29th July, 2002 to those members entitled thereto.

(iv) The Register of Members of the Company will be closed for the purpose of dividend from 17th July, 2002 to 26th July, 2002 (both days inclusive).

(v) The 91st Annual General Meeting of the Company has been convened for 26th July, 2002.
 

Notes :

(1) The Company's corporate strategy aims at creating multiple drivers of growth anchored on its core competencies.The Company is currently focused on four business groups : FMCG, Hotels, Paperboards, Paper &  Packaging and Agri Business. The Company's organisational structure and governance processes are designed to support effective management of multiple businesses while retaining focus on each one of them.

(2) The business groups comprise the following :

(3) The Branded Garments, Greeting Cards & Gifts and Branded Packaged Foods businesses are presently engaged in product development and scaling up of operations. Accordingly segment results largely reflect start up and business development costs.

(4) In its Hotels business, the Company has been engaged in implementing its strategic investment plans to complete the ITC Welcomgroup chain. Capital employed of Rs. 782 Crores includes Rs. 676 Crores relating to the recently opened hotels, namely ITC One in New Delhi and ITC Grand Maratha in Mumbai, as well as capital work in progress in respect of hotels under construction.

The segment results reflect the gestation cost of the newly opened hotels, the impact of the global slump in international travel post the 11th September / 13th December events and the holding cost in respect of Searock Sheraton which has been the subject matter of a prolonged legal dispute. Depressed market conditions are expected to continue in the short term.

(5) The Paperboards, Paper and Packaging segment incorporates the impact of the amalgamation of the erstwhile ITC Bhadrachalam Paperboards Limited with the Company effective 1.4.2001.

(6) The Company's Agri Business exports agri commodities, supplies agri raw materials to the Branded Packaged Foods business and sources leaf tobacco for the Cigarattes business. The segment results were impacted by the tobacco crop holiday and difficult global trading conditions, particularly relating to exports of marine products which were adversely affected by the economic downturn in the U.S. and Japan.

(7) Unallocated corporate assets include Rs. 881 crores of legacy assets acquired by the Company as part and parcel of the schemes facililating exit from the Financial Services and Edible Oils businesses in 1997.