ITC's post-tax profit (before exceptional
items) for the quarter ended 31st December 2005 registered a growth of 24.8% to Rs. 582.27
crores, while pre-tax profit at Rs. 842.58 crores posted a growth of 26.6%. Earnings per
share (post share split & issue of bonus shares) for the quarter stood at Rs. 1.55.
Viewed in the context of the base effect (tax refund of Rs.33 crores in the same quarter
last year), the growth in post tax profit is even more commendable.
The Company's Gross Turnover at Rs. 4190
crores recorded a strong growth of 28.5% while Net Turnover at Rs. 2556 crores grew 37.5%
driven by Cigarette sales, ramp up of the new FMCG businesses, higher agri exports and
improved performance of the Hotels and Paperboards, Paper & Packaging segments. The
non-cigarette topline which now accounts for 49% of the Company's Net Turnover, grew by
57% during the quarter.
The 3 months period ended 31st
December 2005 witnessed the achievement of the highest ever levels of sales and profits
(before considering exceptional items) declared in any quarter.
FMCG
Branded Packaged
Foods
The Company's Branded Packaged Foods
business continued to expand rapidly with sales recording an impressive growth of 85% over
same period last year. In the Staples category, the branded spices business was scaled up
with the extension of 'Aashirvaad Spices' (chilli
powder, turmeric powder and coriander powder) to target markets leveraging the brand's
association with superior quality and consistency. 'Aashirvaad
Atta' continued to gain increasing consumer franchise, further
consolidating its position as the clear market leader amongst national branded players. 'Aashirvaad Select', ITC's premium atta offering,
was also extended to target markets during the quarter. Plans are on the anvil to launch
valued added variants to augment product range.
In the Confectionery category, the business
launched 'mint-o masti blue' in a
refreshingly new pack design and product formulation. The product has met with encouraging
response from customers and is being extended to target markets. The business also
launched 'Cofitino', during December 2005 in
select markets marking its foray into the Toffees segment.
The 'Kitchens
of India' range was further strengthened with the launch of a number of
variants in the packaged desserts segment.
In the Biscuits category, the 'Sunfeast' range continued to make impressive
gains. Market extension of 'Sunfeast Golden Bakes'
and 'Sunfeast Snacky' continued during the
quarter. These product launches/extensions, alongwith the strong trend in sales of other
value-added products in the Creams and Marie segment, resulted in enriching the sales mix
and improving realisations. 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.
Lifestyle Retailing
The 'Wills
Lifestyle' range comprising 'Wills Classic'
(formal wear), 'Wills Sport' (relaxed wear)
and 'Wills Clublife' (social/evening wear)
recorded a strong performance on the back of improved range vitality and the introduction
of a large number of style and colour options. Sales for the 9 months ended December 2005
grew over 50% over the same period last year. The 'Wills' range is now available in 39
large format retail stores and 109 multi-brand outlets apart from the 37 exclusive 'Wills
Lifestyle Stores'. The business continued to leverage the state-of-the-art 'master
facility' towards developing superior products and also scaled up outsourced manufacturing
at the 'just-in-time' facility with a view to servicing consumer preferences more
effectively and to improve inventory management.
The 'Wills Lifestyle' range was further
augmented during the quarter with the extension of 'Essenza
Di Wills', an exclusive line of prestige fragrance products, to select
'Wills Lifestyle' stores. The products have met with encouraging response from discerning
consumers.
The distribution reach of 'John Players', the mid-market brand, was further
strengthened during the quarter. The brand is now available in 75 Exclusive Brand Outlets
and nearly 2100 Multi-brand and high traffic outlets. Sales for the 9 months ended
December 2005 grew over 70% over the same period last year. The stylish winter collection
has further reinforced the brand's "comfort dressing" positioning while the
introduction of outerwear, denims etc. has led to increased value capture on account of
superior product mix. The brand's association with Hrithik
Roshan, who has been signed up by the Company as the brand ambassador for
John Players, is beginning to pay dividends by reinforcing its 'style
with a playful side' 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 and growing preference among target consumers.
Stationery sales for the 9 months ended December 2005 tripled over the same period last
year. The business also launched a range of products aimed at the mass market under the
brand name 'Saathi'. Product extension is
underway to target markets. The 'Expressions'
range of Greeting cards consolidated its leadership position in multi-brand outlets in the
key metro markets.
Safety Matches
The Matches SBU achieved robust volume
growth through continued focus on product quality, enhanced supply chain capabilities and
distribution reach, even as the margins improved on the back of higher realisations and
effective cost management.
The recent acquisition of WIMCO Ltd. by the
Company's wholly owned subsidiary Russell Credit Ltd. has begun to yield synergy
advantages. 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. Consequent to its successful
de-listing offer and the continuing exit offer (upto June 2006) to the shareholders of
WIMCO Ltd., Russell Credit Ltd. now owns 92.28% of the paid-up equity share capital of
WIMCO Ltd.
Agarbattis
ITC continues to partner with small and
medium enterprises to help them raise their quality and process standards. Three agarbatti
manufacturing units have received ISO 9001-2000 certification till date aided by the
Company's process and technical inputs. In yet another manifestation of ITC's commitment
to the triple bottomline, the Company began sourcing agarbattis from Khadi & Village
Industries Commission (KVIC) approved units. This collaborative venture is expected to
result in employment generation, particularly in the semi-urban and rural areas.
The 'Mangaldeep' brand is fast emerging as
the only national brand in an industry dominated by multiple local brands. The brand was
further strengthened during the quarter with the launch of Mangaldeep Dhoop in select
target markets in the North.
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
April 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. Several initiatives were undertaken during the quarter including roll out
of Gold Flake Kings in modernised round corner pack and the introduction of Festival packs
across major filter brands. On the manufacturing front, the business continued to make
investments in technology upgradation
Hotels
Segment revenues at Rs. 219 crores grew by
31.4% 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 profits at the pre-tax level in its first nine months of operations. ITC Sonar
Bangla consolidated its position as the market leader both in terms of 'Revpar' (revenue
per available room) and Room Revenues 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. In keeping with the
Company's strategy to maximise presence in key business locations, pre-project work in
respect of the second property at Bangalore is underway.
Paperboards, Paper
& Packaging
Sales of value added paperboards continued
to record strong growth during the quarter, further enriching the product mix. These
products now constitute appx. 55% of total paperboard sales. In the recycled segment, the
recently acquired Kovai unit recorded cash profits during the quarter on the back of
improved capacity utilisation and savings in energy cost post commissioning of a captive
power plant.
In fulfillment of its commitment to a
cleaner environment, the Company's Elemental Chlorine Free (ECF) pulp mill continues to
meet world-class environmental standards. Plans are underway to nearly double pulping
capacity to achieve cost competitiveness and meet future growth requirements. With
increasing awareness of hygiene and safety among Indian consumers, industries like foods
and pharmaceuticals are progressively switching to ECF pulp-based paperboard.
The Packaging and Printing business
continued to leverage its recent investments in technology upgradation to expand its range
of offerings to include a wider variety of contemporary packaging formats. This has
enabled it to provide discernibly superior and innovative packaging solutions not only to
the Company's cigarettes business but also to the FMCG and paperboards businesses. Apart
from providing a source of sustainable competitive advantage to these businesses, the
investments have begun delivering substantial savings to the ITC system. Plans are
underway to augment capacity both in the Cartons and Flexibles segment.
Agri business
The e-Choupal network was further ramped up
to 5500 installations, reaching out to over 3 million farmers in the states of Madhya
Pradesh, Uttar Pradesh, Maharashtra, Rajasthan, Karnataka, Kerala 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. Two more 'Choupal
Sagars' have commenced operations at MHOW and Vidisha (M.P.) while construction at 10 more
sites is fast nearing completion. Such malls, in synergistic combination with the
e-Choupal network would serve as the core infrastructure to support ITC's rural
distribution strategy.
Agribusiness revenues during the period
April'05 to December'05 grew by 63% driven by wheat, non-basmati rice exports and leaf
tobacco. However, Segment Results were impacted due to the incremental costs associated
with scaling up of the choupal network, income from export incentives included last year
and lower margins in leaf tobacco exports consequent to change in sales mix during the
period.
The Board of Directors, at its meeting held
in Kolkata on 20th January 2006 approved the financial results for the quarter ended 31st
December 2005, which are enclosed.
