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Financial Results for the quarter ended 30th September, 2007
ITC's Net Turnover
for the quarter, at Rs.3273 crores, reflects a growth of 14.2%
driven primarily by the robust scale up of the Foods, Lifestyle
Retailing and Stationery businesses coupled with healthy growth in
the Hotels and Paperboards and Packaging segments. The
non-cigarettes businesses in aggregate grew by 17%.
The Company's
Pre-tax Profit for the quarter at Rs.1133 crores grew by 18.3%.
While Post-tax Profit at Rs.771 crores reflected a 13.4%
growth, the underlying growth stood at 18.7%, after adjusting for
the Rs 30 crores tax refund received in the corresponding quarter of
the previous year. Earnings Per Share for the quarter stood
at Rs.2.05.
FMCG - Others
Branded Packaged
Foods
The Company's Branded
Packaged Foods business continued to expand rapidly with sales
growing 58% over last year.
The 'Bingo!'
range of salty snacks continued its strong growth momentum with
wider distribution across targeted markets. The positive consumer
response attests to the Company's ability to translate its deep
consumer insight and understanding of the Indian palate into a
delightful snacking experience.
Sales in the biscuit
category grew by 54%. The product mix has further improved with
enhanced sales of higher value variants like Milks, Creams and
Cookies. The excise relief accorded in the budget to low and mid
priced biscuits, consistent with the government's stated intention
of promoting the processed food industry, has given a fillip to the
sector. It is hoped that the government would consider the
industry's representation favourably and extend the relief to the
entire category. As part of the Sunfeast Open Tennis
Championship, the business unveiled a Special edition of Sunfeast
Sachin Fit Kit range of multi-grain biscuits co-created with
Sachin Tendulkar, focusing on active health and fitness, a universal
value proposition for consumers across all age groups.
In the Staples
category, 'Aashirvaad Atta' maintained its leadership
position amongst the branded players with revenues growing by 44 %
during the period. The product range was further boosted with the
recent launch of Aashirvaad MP blend Atta to cater to
specific consumer needs in select markets. Aashirvaad, India's
largest selling kitchen ingredients brand witnessed the launch
of its new range of "Aashirvaad Select Organic Spices", which
is produced to stringent quality standards. The Company has recently
signed an MOU with the Government of Nagaland and the Spices Board
for the development of the famed Naga chilli through a host of
initiatives across the agri-value chain. Such an initiative, while
underlining the Company's commitment to creating stakeholder value
through service to society would further reinforce Aashirvaad's
commitment towards providing healthy cooking aids for the discerning
Indian homemaker.
The Confectionary
category grew by 33 % driven mainly by Eclairs. The product range
was further expanded with the launch of 'Mint-O Fresh Cool Green'
and 'Candyman Mango Licks' during the quarter.
Lifestyle
Retailing
The Lifestyle
Retailing business with a strong growth of 21% during the quarter
continued to increase its retail footprint with the addition of 3
new stores in strategically located malls. Distribution reach was
further enhanced with the expansion of the 'exclusive brand outlet'
network and increased presence in reputed 'large format stores' and
key 'multi-brand outlets'
The resounding
success of the 'Wills Lifestyle India Fashion Week' (WIFW) held in
September 2007 reinforced and strengthened the brand's association
with high fashion and premium imagery. In line with the objective of
making designer wear accessible and relevant to the Wills Lifestyle
consumers, the business has collaborated with some of the leading
fashion designers of the country to position premium offerings under
the 'Wills Signature' line. This has met with excellent
response from the fashion conscious consumers. Wills Lifestyle is
now recognised as one of the few multi-category luxury lifestyle
brands as per a survey by the US based Time magazine.
In the popular
segment, the 'John Players' brand posted impressive gains
with sales growing by 26% over last year fuelled by both increased
volumes and improved realizations. The brand effectively leverages
the celebrity association with youth icon Hrithik Roshan
mustering increased consumer mind share.
The launch of 'Miss
Players' in the last quarter, which offers 'a vibrant wardrobe
of cool casual-wear, exciting party-wear and chic work-wear' for the
spirited young Indian woman, has been received very enthusiastically
by the target consumers. This complete range complemented by a whole
set of accessories is now being extended to reach exclusive stores
and multi-brand outlets in malls and high-street locations in key
consumption centres of the country.
The business
continued to actively pursue opportunities in the Exports
arena, establishing long-term partnerships with high potential
customers. Manufacturing capacities have been augmented to take full
advantage of the emerging growth opportunities.
Personal Care
Continuing with its
tradition of bringing world class products to Indian consumers and
building on the success of 'Essenza Di Wills', the exclusive
range of fine fragrances and super premium personal products, the
Company launched 'Fiama Di Wills', a premium range of Shampoos in
eight metro markets.
A unique blend of
nature and science, 'Fiama Di Wills' shampoos are an outcome
of 4 years of extensive product development by scientists at the ITC
Research and Development Centre with the assistance of American
product formulation experts. The fragrances for the various products
have been developed in conjunction with leading international
fragrance houses. The packaging is contemporary and the guiding
design principle, including the cap closure, highlights the brand by
combining round and organic natural form with a clean and scientific
look. The shampoos, introduced in 2 convenient sizes are offered in
4 variants designed to deliver very specific needs to the consumers.
The superior product and brand experience is a result of ITC's
extensive and deep consumer insight.
The 'Fiama Di
Wills' range was further expanded with the launch of Shower
Gels, which offer 3 transparent variants with suspended beads.
Each variant provides a specific benefit to the consumer.
The Company has
recently launched the 'Superia' range of Soaps and
Shampoos in the mass-market segment at select markets of Andhra
Pradesh and Orissa. 'Superia' offers a range of four soap variants
and two shampoo variants with a range benefit of Glowing skin and
Shiny hair. The soap range includes Fragrant Flower with the
fragrance of rose and lavender oil; Soft Sandal with the fragrance
of sandal and almond oil; Natural Glow with neem and coconut oils
and Healthy Glow with orange oil. The shampoo range includes Shiny
Black with triple conditioners and with hibiscus and brahmi extracts
and Vibrant Green with triple conditioners and amla and arnica
extracts.
Greeting, Gifting
& Stationery Business
The Stationery
business grew impressively with sales increasing by 55% over last
year. 'Classmate', which is the most widely distributed
notebook brand in the country has now established itself as the most
favoured notebook among school going children because of its
superior whiteness and smoothness characteristics. The premium
offering 'Paperkraft' targeted at quality conscious
executives and college goers is now widely available at all modern
format stationery stores. In line with its 'Citizen First'
philosophy, the Company continues to contribute Re.1 for every
notebook sold to its social responsibility initiatives.
Safety Matches &
Incense Sticks
The business
continued to build on its already strong market standing by
leveraging synergies arising from the acquisition of Wimco Ltd by
Russel Credit Ltd., (a wholly owned subsidiary of the Company) in
the form of enhanced brand presence, rationalized sales and
distribution structure, improved servicing of proximal markets and
access to production capacities. The new product variants such as 'Aim
Mega' and 'Aim Metro' launched at the end of last quarter
are now being extended across major cities and other select
identified markets.
The Company's 'Mangaldeep'
brand of Agarbattis is fast emerging as the only national brand. Its
market standing was further enhanced with the launch of 'Mangaldeep
Yantra', which evokes the fragrance of a temple. This has been
received very positively in the market. The business, which has
witnessed a sales growth of 14%, has successfully collaborated with
the small processors to meet exacting quality standards with six
such processors having obtained the ISO 9001 quality certification.
FMCG-Cigarettes
The Company's
unflinching pursuit of providing internationally benchmarked quality
products has enabled it to sustain its leadership position in the
industry. The business continued to invest in world-class
information technology, improved marketing and distribution
processes and high-tech manufacturing facilities to deliver enhanced
and superior value to consumers with contemporary packaging, finer
blends and improved productivity.
The cause for
anxiety, however, stems from the steep increase in indirect taxes on
cigarettes in India. During the quarter, the business suffered the
full impact of VAT imposed by most States in India, central sales
tax as applicable and trade taxes in the state of U.P along with the
increase in excise duties on cigarettes in excess of 6% - all of
which has affected the cigarette industry adversely. Despite lower
volumes, the additional burden of indirect taxes during the quarter
aggregated to Rs. 411 crores, consequent to the staggering increase
in such taxes of 29% per pack over the corresponding quarter of the
previous year. Such high rates of taxation at nearly 132% of the
value of the product (ex factory price net of taxes) will only drive
consumers to switch to cheaper and inferior forms of tobacco,
resulting in lower revenue collections by the Exchequer from this
sector.
The requirement to
print pictorial health warnings on tobacco product packs under the
'Cigarettes and Other Tobacco Products (Prohibition of Advertisement
and Regulation of Trade and Commerce, Production, Supply and
Distribution) Act, 2003' (COTPA) will further constrain the
industry. While these provisions of COTPA are proposed to be made
effective from 1st December 2007, the scope and implementation
processes including the timeline need to be rationalized. The
company hopes that the Group of Ministers which has been set up to
examine the issues arising from these provisions and make suitable
recommendations, will take a pragmatic view keeping in mind the
interests of the livelihood of 35 million people involved with the
tobacco industry and India's status as the third largest tobacco
producing country in the world.
Hotels
The Hotels business
recorded steady growth during the quarter with Segment revenues
growing by 13%, driven by improved REVPAR (revenue per available
room) at most properties and superior food & beverage performance.
The business moved away from the dual pricing methodology to Rupee
billing from September to insulate itself from the impact of the
appreciating rupee.
The renovation of the
premium Towers block at ITC Hotel The Maurya New Delhi - The Luxury
Collection is nearing completion. Similarly, comprehensive
renovation and product upgradation programme is underway at 3 more
properties in keeping with the Company's strategy of maintaining
contemporariness and premium positioning as one of the finest hotel
chains in the world.
The business made
rapid progress as per the project timelines in the construction of
its new super-deluxe luxury hotels at Bengaluru and Chennai. During
the quarter the business also acquired land at Hyderabad to build a
premium property in the near future.
Paperboards,
Specialty Paper & Packaging
The business regained
its growth trajectory after the first quarter with segment revenues
improving by 18% during the quarter. This was driven by the
stabilization of the paperboard machine at Bhadrachalam after its
rebuild and growth in sales of Value Added Paperboard. The positive
performance of the Kovai mill continues with all-round improvement
in efficiencies.
Rapid progress is
being made in completion of the capacity augmentation projects - a
new paper machine and an additional pulp mill, both at Bhadrachalam.
The pulp mill with a capacity of 120000 tons of hardwood pulp,
expected to be commissioned in the last quarter of this fiscal, will
provide a distinct cost advantage, apart from removing the
dependency on imported hardwood pulp, which has seen an
unprecedented run-up in prices and adversely affected margins across
the industry. The paper machine will augment capacity by about
1,00,000 TPA in 2008/09 and will drive growth with strong forward
linkages with the stationery business.
In line with the
Company's objective of achieving total self-sufficiency in fibre,
the business is according high priority to its accelerated fibre
programme for high yielding disease resistant clonal saplings
developed by its in-house R&D. This project provides sustenance and
livelihood to tribal farmers located in proximity to the paper mill.
The business continues to provide free support and extension
services for land development, planting of saplings and maintenance
of plantations.
In the Packaging and
Printing business, investments made in capacity augmentation at the
Chennai unit are now providing superior and innovative packaging
solutions for the cigarette business. Similarly, deliveries from the
flexibles and carton lines, commissioned satisfactorily at
Uttarakhand and Chennai, are progressively being scaled up to cater
to the distinctive and innovative packaging requirements of the
Foods business and other external customers. The business has also
built up critical volumes in the supply of value added packaging to
the Consumer Electronic industry from its Chennai facility.
Agri business
During the quarter,
revenues of the Agri Business segment declined by 13%. The
performance was adversely impacted as a consequence of the business
having to dispose off agri commodities in the domestic market at
prices lower than those paid to farmers through the eChoupal
network. This was due to ban on exports and nil duty imports, which,
along with subsidized auction sales depressed prices in the domestic
market. Further, the sharp appreciation of the rupee affected
realizations on exports contracted in the past at US $ denominated
rates.
Unforeseen
circumstances apart, the business should regain its growth
trajectory and profitability with market dynamics getting restored
in the agri commodities sector. Apart from hedging, the business is
re-negotiating prices for US $ denominated export orders to address
the impact of the appreciating rupee.
Meanwhile the rural
marketing initiatives were advanced further. Nineteen Choupal
Saagars are now operational in the states of Madhya Pradesh,
Maharashtra and UP. Further, the pilot for retail of horticulture
products was extended during the quarter with the launch of four
stores and nine shop-in-shops (through tie-ups with Food Bazaar and
TruMart) in the cities of Hyderabad and Pune.
Strategic
Investment
Consequent to the
acquisition of the entire shareholding in Technico Pty. Ltd.,
Australia (Technico) by Russell Credit Limited, a wholly owned
subsidiary of the Company (Russell Credit), Technico and its six
wholly owned subsidiaries became wholly owned subsidiaries of
Russell Credit and also of the Company, effective 17th August, 2007.
The acquisition is
expected to provide ITC's salty snacks business strategic sourcing
support through secured long term access to high quality chip grade
potato seeds. The Company also seeks to leverage Technico to make
available superior quality horticulture produce to be retailed
through the Choupal Fresh stores.
Consistent with the
Company's philosophy of contributing to the development of the
agriculture based rural economy, the acquisition will also provide a
strong synergy to the potato based value chain, enhancing farmer
capabilities through access to high quality seeds and
internationally benchmarked practices in agronomy.
Contribution to
Sustainable Development
In pursuit of its
abiding commitment to create stakeholder value through service to
society, the Company made steady progress during the quarter in its
social and environmental initiatives.
The Company continued
to intensify its footprint in the social sector by expanding to
newer districts during the year and retained focus on the three main
areas of interventions under 'Mission Sunehra Kal': (a)
natural resource management, which includes wasteland, watershed and
agriculture development; (b) sustainable livelihoods, comprising
genetic improvement in livestock and women's economic empowerment;
and (c) community development, with focus on primary education and
health and sanitation. The Company currently runs 61 social
development projects in 44 districts spread over the states of
Kerala, Andhra Pradesh, Karnataka, Tamil Nadu, Maharashtra, Madhya
Pradesh, Uttar Pradesh, Rajasthan, Orissa, West Bengal and Bihar.
The Company's unique
initiative of wasteland development through its Farm and Social
Forestry Programmes was scaled up to take the total area under
coverage to 75,000 hectares providing approximately 35 million
person days of employment among the disadvantaged. The Company's
Social Forestry Programme has so far promoted plantations covering
11,456 hectares in 380 villages reaching out to more than 13,000
poor households. Not only have their earnings per acre improved
significantly, most beneficiaries have also ensured that their
contribution to the Village Development Fund continues apace. Their
own incomes have been invested wisely into productive assets to
ensure a long-term virtuous cycle of development.
The soil & moisture
conservation programme, designed to assist farmers in identified
moistures-stressed districts continued to expand its coverage during
the quarter. To date, about 1,671 water-harvesting structures
provide critical irrigation to about 15,857 hectares. In all, the
watershed development programme today covers 30,053 hectares.
In continuation of
its policy of providing an integrated solution for promoting a
sustainable water management regime, the Company lays equal emphasis
on ensuring efficient usage of water through interventions aimed at
improving farm productivity, promoting group irrigation projects and
demonstrating the use of sprinkler sets. Sustainable agricultural
practices have been supported with the promotion so far of more than
10,770 organic fertiliser units through vermi-composting and NADEP
technologies.
The sustainable
livelihoods initiative of the Company strives to create alternative
employment for surplus labour and decrease pressure on arable land
by promoting non-farm incomes. Among many such activities, the
programme for genetic improvements of cattle through artificial
insemination to produce high-yielding crossbred progenies has been
given special emphasis because it reaches out to the most
impoverished and has the potential to pull them out of poverty.
Ninety-Five cattle development centres already cover more than 1,900
villages. To date, these centres have provided integrated animal
husbandry services to more than 1.25 lakh milch animals. The
initiative for the economic empowerment of women also continued
apace: to date, 13,698 women have been organised under 905 self-help
groups (SHG) with total savings of Rs 53.40 lakhs. Nearly 7,000
women have been gainfully employed either through micro-enterprises
or as self-employed through income generation loans.
The Board of
Directors, at its meeting in Kolkata on 26th October, 2007, approved
the financial results for the quarter ended 30th September 2007.
Click here for the
Financial Results
