ITC profit rises 5.6% on lower input costs

Declares special dividend of Rs 2 a share in addition to dividend of Rs 6.5 for year ended March 31

ITC Ltd posted a net profit of Rs 2,495.20 crore for the quarter ended March 31, 2016, against Rs 2,361.18 crore on a standalone basis — a rise of 5.6 per cent. Factors that led to the growth include improved realisations, margin expansion, benign input costs and a favourable base effect.

During January-March this year, the company's standalone net sales increased 9.5 per cent to Rs 10,062 crore against Rs 9,188 crore in the year-ago period.

The cigarette business, which accounted for 46 per cent of the company’s total net earnings during the last quarter of 2015-16, continues to be under stress on account of the cumulative impact of a steep increase in taxation and intense regulatory pressures. Nevertheless, it rose 10.17 per cent and contributed Rs 4,639.17 crore to ITC's net earnings in the last quarter. The company's gross profit from the cigarette segment stood at Rs 3,019 — an 11.5 per cent rise.

According to Abneesh Roy of Edelweiss Securities, with the government raising excise duty on cigarettes by 10 per cent in the Budget, a further dip of five per cent in cigarette volume could be expected in 2016-17.  “We expect earnings growth in FY17 and FY18 to be a high single digit. The success of the new launches and the pace of innovations need to be closely monitored,” he said in an e-mail.  

Revenue from business in the fast-moving consumer goods (FMCG) domain other than cigarette, rose moderately by 5.3 per cent to Rs 2704 crore in the last quarter compared to Rs 2,566 crore in the corresponding period of FY15. According to the company, challenges in rural demand due to the second successive year of sub-par monsoons was one of the reasons for the relatively muted growth in the segments.

ITC's hotels business continued to remain subdued with the segment revenue increasing 4.8 percent to Rs 363 crore in the last quarter against Rs 346 crore during the January-March 2015 period. While occupancy improved during the year, average room rates remained under pressure due to subdued growth in foreign tourist arrivals coupled with the steady supply of new room inventory particularly in key markets such as New Delhi, Mumbai and Bengaluru. However, the agro business saw a major jump of 26.53 per cent in its net quarterly revenue, which increased to Rs 1,807 crore from Rs 1,428 crore.

The company has declared a special dividend of Rs 2 per share in addition to the dividend of Rs 6.5 per share for the year ended March 31, 2016. Total cash outflow in this regard will be Rs 8,233 crore including dividend distribution tax of Rs 1,392 crore.

Furthermore, ITC has proposed issuance of 1 bonus share of Re.1 each for every two existing ordinary shares of Re 1 held by the members on the record date. The Board also recommended a transfer to General Reserve of R s 990.00 crores. All these measures are subject to shareholders' approval.