Better margin rescues ITC's June quarter

Cigarette volumes for the company had shown double digit decline over the last few quarters

ITC reported a net profit of Rs 2,265 crore in the June quarter, 3.6 per cent more than the same period last year.

Total income fell 7.1 per cent to Rs 8,588 crore over the same period.

The bottom line improved due to a better operating margin. As per Bloomberg poll, analysts had pegged net sales at Rs 9,300 crore and net profit at Rs 2,342 crore. Expenses were Rs 5,202 crore against Rs 5,971 crore in the same period last year.

Revenue from the cigarette segment was Rs 4,150 crore, from Rs 4,201 crore in the same period of 2014. Ebit (earnings before interest and taxes) improved 2.2 per cent to Rs 2,781 crore. ITC had increased the price of cigarettes by 15 per cent in March to compensate for 18 per cent increase in tax. The decline in cigarette sales volume was along expectation. Analysts had expected a double-digit fall, as had happened in the two earlier quarters.

Cigarettes accounted for 48 per cent of ITC’s revenue in the quarter. “The performance of the business reflects the extremely challenging operating environment for the legal cigarette industry in India, facing unprecedented pressure on sales volumes,” the company said.

Revenue from other business — including packaged foods, apparel, education and personal care products — rose 12.2 per cent to Rs 2,171 crore from the same period last year. However, it fell 15 per cent from the March quarter. ITC said the food business, main portion of FMCG other business, showed an improvement. “The banded packaged foods businesses posted healthy growth in revenues, despite sluggish demand and regulatory challenges in the instant noodles category.

Revenue from the hotels business grew 15.7 per cent to Rs 287 crore against Rs 249 in the corresponding period last quarter. Though revenue from agri-business declined 29 per cent to Rs 2,325 crore, the Ebit margin here improved 15 per cent to Rs 234 crore.