In line with street estimates, ITC Ltd posted a 3.85 per cent increase in its net profit for the quarter ended December 31, 2018 at Rs 3209.07 crore with a 15.79 per cent increase in its total revenue at Rs 12267.65 crore. However, if exceptional items in the post-tax profit of the third quarter of the last fiscal year is deducted, then it represents a 13.8 per cent rise in profitability – the highest for ITC in the last 17 financial quarters.
The net profit and total revenue during the third quarter (Q3) of the previous fiscal year stood at Rs 3090.20 crore and Rs 10594.55 crore respectively.
In a statement, ITC said that the profit during the Q3 period of the 2016-17 fiscal year includes an exceptional item of Rs 270 crore. Excluding this item, which brings down the reported profit to Rs 2820.20 crore, translates into a growth of 13.8 per cent in the company’s profitability during the Q3 period of 2018-19. The company had made provisioning of this amount in respect to Tamil Nadu entry tax which was written back based on a Supreme Court order.
The performance is backed by increased profit from its core cigarette, non-cigarette FMCG, hotels and paperboards business, higher income from other sources and lower finance costs. However, at the end of the day’s trade, the ITC scrip plunged by 4.16 per cent at Rs. 277.70 apiece.
According to Abneesh Roy, research analyst with Edelweiss Securities, ITC’s margins in cigarettes business was down by 50 basis points on a year-on-year comparison although the pre-tax profit, from this business vertical grew by 8.8 per cent at Rs 3557.66 crore due to higher leaf tobacco prices and higher capsule filter usage.
Moreover, sales volume in cigarettes was up by eight per cent in the quarter under review which helped ITC clock a revenue growth of 9.60 per cent at Rs. 5073.38 crore.
The non-cigarette FMCG business, which includes branded packaged foods, noodles, biscuits and several others posted a healthy growth of 63.14 per cent at Rs. 76.66 crore. However, ITC said that the growth in the overall segment revenue was partially impacted by the ongoing restructuring of the lifestyle retailing business (comprising the Wills Lifestyle and John Players brands) and structural changes pertaining to the timing of trade promotions in the matches and agarbatti business.
The income from this segment rose by 11.46 per cent during the period under review at Rs. 3200.98 crore as against a topline of Rs. 2871.78 crore in the year-ago period.
Driven by improvement in average room rates, the hotels business posted a revenue growth of 11.72 per cent at Rs. 451.86 crore with a 10.08 per cent growth in its net profit at Rs. 60.29 crore on a year-on-year basis.
“Operations at the recently commissioned hotels - ITC Kohenur and ITC Grand Goa, Resort & Spa - were scaled up. The business made steady progress during the quarter in the construction of ITC Hotels at Kolkata & Ahmedabad and WelcomHotels in Amritsar, Guntur & Bhubaneswar”, the company said.
Led by strong demand and capacity augmentation in value added paperboard and Décor segments, the company’s paperboards, paper and packaging business witnessed a 23.81 per cent jump in its pre-tax profit at Rs. 332.13 crore while revenue jumped by 20.5 per cent at Rs. 1924.61 crore.
According to ITC, the increase in profitability from this business vertical was driven by product mix enrichment, higher realisation, strategic investments in imported pulp substitution, process innovation leading to improved pulp yield and benefits of a cost-competitive fibre chain.
On the agri business front, market opportunities in wheat and oilseeds, along with enhanced focus on value-added portfolio - especially coffee, spices and others, resulted in 25.72 per cent revenue growth at Rs. 1542.51 crore during the quarter under review. However, in the leaf tobacco vertical, subdued demand for leaf tobacco in international markets, relatively steeper depreciation in currencies of competing origins in recent years along with leaf cost escalation pertaining to Andhra 2017 crop resulted in profitability from the segment falling by 14.80 per cent at Rs. 198.81 crore.
|Q3 FY 2018-19||Q3 FY 2017-18||Growth percentage|