ITC net profit up over 10% in Q1 (Second Lead)

Kolkata : Cigarette-to-FMCG major ITC Ltd on Thursday reported a 10.08 per cent increase in its net profit to Rs 2,818.68 crore in the quarter ended on June 30 as compared to Rs 2,560.50 crore in the year-ago period.

On a comparable basis, its gross revenue from sale of products and services was at Rs 10,722.22 crore in the quarter, down by about 22 per cent from Rs 13,722.21 crore in the corresponding period last year.

However, gross sales (net of rebates and discounts), on a comparable basis, grew by 13.5 per cent to Rs 18,171.66 crore for the quarter under review from Rs 16,010.66 crore in the corresponding period last year.

The company's overall expense during the quarter decreased by over 32 per cent to Rs 6,978.5 crore as compared to Rs 10,332.61 crore in the corresponding period last year and the excise duty paid also fell drastically to Rs 167.56 crore, from Rs 3,845.76 crore in the year-ago period.

However, the company mentioned excise duty during the quarter was not comparable with the previous period after the introduction of Goods and Services Tax (GST) as steep escalation in tax incidence continues to weigh on the segment.

The legal cigarette industry, already reeling under the cumulative impact of steep increase in taxation over the last five years and intense regulatory pressures, was further impacted by a sharp increase of 13 per cent in tax incidence on cigarettes (19 per cent increase for the king-size filter segment) under GST, a company statement said.

"Coupled with the increase in excise duty rates announced in the Union Budget 2017, this resulted in an incremental tax burden of over 20 per cent on the Cigarette business post implementation of GST," it said.

Revenue from cigarettes during the June quarter fell by almost 42 per cent to Rs 5,127.59 crore from Rs 8,774.16 crore in same period last year, according to the regulatory filing.

In the FMCG -others segment, which includes branded packaged foods businesses, apparel, personal care products, agarbattis and others, the revenue grew by 14.3 per cent during the quarter.

"This was led by staples, snacks and meals business in the branded packaged foods business, deodorants and liquids in the personal care products business, classmate notebooks and agarbattis offset by the ongoing restructuring of retail footprint and trade presence in the lifestyle retailing business," the statement said.

Agri-business posted revenue of Rs 3,151.27 crore in the quarter, up by 14.15 per cent from Rs 2,760.52 crore in the same period last year.

"The (agri) business leveraged market opportunities in oilseeds, rice, spices and coffee resulting in robust growth in revenue during the quarter. However, pressure on legal cigarette industry volumes, adverse quality and leaf cost escalation pertaining to Andhra 2017 crop, and lower export incentives weighed on segment results," the company said.

The business continues to step up initiatives in the area of value added agriculture to create new vectors of growth by leveraging its agri-commodity sourcing and processing expertise and distribution network of the company.

"These include the launch of packaged prawns, super safe spices, fresh fruits and vegetables and dehydrated onions under the ITC MasterChef and Farmland brands. Plans are afoot to rapidly scale up these interventions in the ensuing months," it said.

The hotels segment recorded healthy growth in revenue and profit driven by higher room rates, strong food & beverage sales and high operating leverage.

The company commissioned ITC Kohenur, a 271 room luxury property at Hyderabad, on June 1, 2018.

However, in terms of paperboards, paper and packaging business, the segment results registered growth driven by strategic investments in imported pulp substitution, process innovation leading to improved pulp yield, benefits of a cost-competitive fibre chain, product mix enrichment and higher realisation.

"While there was some improvement in the order book position during the quarter, segment revenue remained muted due to slow pick-up in demand in end user industries and unabsorbed capacity in the domestic industry," it said.

The company said capacity utilisation was also scaled up at at the Tribeni unit, while rebuilding of a paperboard machine at the Bhadrachalam unit is nearing completion and it is likely to be commissioned in the ensuing quarter, it added.

On Thursday, ITC's scrip rose 0.38 per cent to end the day at Rs 287.15 on the BSE. It announced the quarterly results after trading hours.