ITC Ltd today reported a 17.9 per cent rise in post-tax profit for the third quarter (Q3) ended December 31, 2004, at Rs 448.94 crore on the back of a 10 per cent rise in net sales for the quarter at Rs 1795 crore.

Pre-tax profit grew 12 per cent to Rs 638.70 crore and earnings per share rose to Rs 18.10. In the previous financial year, ITC had reported net sales of Rs 1,623 crore, profit before tax of Rs 566 crore and profit after tax of Rs 380 crore, with earnings per share at Rs 15.38.

For the first nine months of this financial year, ITC's net sales stood at Rs 5,308 crore, profit before tax at Rs 2,000 crore and profit after tax at Rs 1,396 crore, with earnings per share at Rs 56.35.

Cigarette sales in the quarter rose to Rs 2,419 crore from Rs 2,302 crore in the same period of 2003-04, while profit before tax inched up to Rs 560 crore in from Rs 510 crore.

Despite the implementation of laws restricting use of tobacco products, imposition of education cess on excise duties and rising state taxes, cigarette sales rose thanks to launches of brands and new pack designs.

Sales of non-cigarette FMCG products in the quarter rose to Rs 152 crore from Rs 88 crore in the same period last year, while segment losses were restricted to Rs 40 crore from Rs 37 crore in Q3 in the last financial year.

Branded packaged foods like its Sunfeast biscuit range gained volumes, and the imminent launch of more differentiated products and development of a outsourced and distributed manufacturing capacities would further push volumes in this category, said ITC in a release.

While its Aashirvaad flour brand did well, new ready-to-eat conserves and chutneys and extension of the marketing range for cooking pastes and ready meals pushed Q3 sales.

Compass

ITC

The story of ITC's third quarter results was one of good growth in the overall bottomline, but lower growth in top line revenue, thanks to a sharp reduction in revenues from its core cigarette business.

Revenues from cigarette sales grew 5 per cent in the third quarter, well below the double-digit growth rates notched up during the first two quarters of this fiscal.

Analysts point out that the low growth has occurred despite raising the prices of a couple of brands in Q3. What's more, revenues from cigarettes were lower in Q3 than in Q2.

However, ITC's other businesses, which account for 30 per cent of revenues, all showed improvement. The non-cigarette FMCG businesses, in particular, have shown good growth in revenues, and losses as a percentage of turnover have come down.

The move up the value chain in the paper business has increased margins. Businesses other than cigarettes contributed 12.9 per cent of ITC's profits in Q3, compared to 5.9 per cent in the same period of FY 04.

Of course, the results have been overshadowed by the Supreme Court's judgment striking down the luxury tax and that should add Rs 500-600 crore in a year to ITC's bottomline. Going forward, with so much good news on the legal front, the market expects a hefty dividend payout.