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ITC net up 18%; non-core biz records maiden profit
Business Standard - 24 May 2014

Non cigarettes FMCG biz records maiden profit in FY14

Meeting Street estimates, cigarettes-to-hospitality company ITC reported a jump of 18 per cent in its final quarter net profit at Rs. 2,278 crore against Rs.1, 928 crore a year ago. Net sales for the quarter were Rs. 9,145 crore, a jump of 12 per cent on a year ago.

One of the highlights remained the company's non-cigarettes fast-moving consumer goods (FMCG) business that made its maiden profit for the full financial year to Rs 22 crore, a jump of Rs 103 crore on a year ago. The segment made a profit of Rs 43 crore in the quarter against Rs 11.87 crore a year ago, a jump of 262.3 per cent. This is the third quarter for which the non-cigarettes FMCG business has shown profit for ITC.

According to analysts, this was expected from the decade-old non-cigarette FMCG segment. It includes businesses such as branded packaged foods, personal care, education and stationery, lifestyle retailing, safety matches and incense sticks.

"Overall it has been in line with expectations and the non-cigarettes FMCG business recording profit for full year is a good sign as it is emerging as a constant source of revenue for the company. Many launches were done through the year. However, total sales were less than expectations," said an analyst with Sharekhan.

ITC's operating margin stood at 34 per cent, a per cent higher than the market expectation. The cigarette business reported net sales growth of 12.6 per cent y-o-y, with a volume decline of little over two per cent, which was largely in line with estimates. Profits from the cigarettes business, key vehicle of profits of ITC, stood 21 per cent higher at Rs 2,552 crore in the quarter.

"Pace of price rises could be key to volume peaking in coming quarters. The Budget is also due and if tax is increased again, there could be more price rise," said V Srinivasan of Angel Broking.

Gaurang Kakkad of Religare Capital Markets pointed out that despite a volume decline, the company reported better cigarette earnings before interest and tax growth of 20.8 per cent (versus estimates of 17-18 per cent growth).

The hospitality business continued to remain under stress for the Kolkata-based company as revenue from the segment grew by 1.6 per cent to Rs 320.51 crore.

In FY14, the hotel business' net sales grew by over five per cent and profits grew by 1.5 per cent at Rs 139.71 crore.

The agri-business profit was up by 14 per cent at Rs. 145.5 crore in the March quarter over net sales of Rs 2,004 crore, higher by eight per cent. Paperboards, paper and packaging business witnessed a profit of Rs 188.41, almost flat growth.

Following the announcement of the results, ITC shares closed at Rs. 342.15, down by 0.77 per cent on previous close, on BSE.