ITC’s September quarter profit rose 21.4% from the year earlier thanks to other income and a write-back as packaged food, personal care, its new Chennai hotel and farm business added to revenues. The Kolkata-based conglomerate’s net profit rose to Rs. 2,230.53 crore and net sales increased 8.8% to Rs. 7,775.79 crore. The earnings fell short of estimates but robust margins offered some cheer.
The country’s largest cigarette maker, with a market share of more than 70%, reported net sales of Rs. 3,723.81 crore for that part of the business, up 10%. Analysts attributed this to the more than 15% increase in cigarette prices due to higher taxes. Cigarette sales by volume fell 3-4% in line with estimates, while the price increase shielded margins, which widened 15.9%. The stock fell 0.74% to close at Rs 340 on the Bombay Stock Exchange on a day the benchmark Sensex fell 0.2%. ITC announced its results around the close of trading.
Revenue and EBITDA (earnings before interest, taxes, depreciation, and amortisation) were below expectation and the increase in net profit was on account of other income and a write-back of around Rs. 192.68 crore, said analysts at broking firms such as Religare and Sharekhan. The write-back was a liability of earlier years towards rates, taxes and interest that ITC no longer has to pay after a favourable high court order.
“The results on a whole may be below expectation, but the company has positive improvement in both gross and operating margins,” said Sharekhan analyst Kaustubh Pawaskar.
After adjusting for the high level of wheat exports in the corresponding quarter of last fiscal, underlying net revenue growth in the quarter was 15.2% mainly because of the branded foods businesses, paperboards and leaf tobacco exports, ITC said in a release accompanying the earnings announcement.
ITC also reduced its losses in the noncigarette FMCG (fast-moving consumer goods) business in the quarter, even though it failed to make a profit for the second consecutive three-month period after having posted its first profit in the fourth quarter of last fiscal.
The division’s loss narrowed to Rs. 12.69 crore from Rs.30.31 crore, while sales rose 16% to Rs. 1,962.22 crore. During the quarter, ITC launched newer variants of instant noodles, finger snacks and atta.
The hotel business – ITC runs the second largest chain in India -- reported a 13.8% growth in revenue to Rs. 246.97 crore, helped by the popularity of its new Chennai property.
However, profit halved, which the company attributed to the relatively weak pricing scenario and gestation costs of new properties. ITC is pursuing its hospitality expansion plan and recently signed management contracts for operating four properties and units under construction at Kolkata, Hyderabad, Bangalore and Gurgaon.
The paperboards, paper and packaging division recorded a growth of 11.7% in revenue to Rs. 1,178.74 crore on strong growth in paperboards and flexible packaging, although the segment was hit by a steep increase in input costs of wood and coal. Farm business revenue went up 8.5% after adjusting for the high level of wheat exports in the second quarter of last year.