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Marginally beating the Street’s estimates, Kolkata-based FMCG (fast moving consumer goods) major, ITC posted a 12.3 per cent rise in its net profit at Rs 2,669.47 crore for the quarter ended March 31 (Q4), while its income from operations rose 6.15 per cent at Rs 15,008.82 crore for Q4. The company’s net profit in the corresponding quarter of FY16 stood at Rs 2,380.68 crore while total income from operations came in at Rs 14,510.01 crore.
Analysts said the Street was expecting a one-two per cent decline in cigarette volumes, but the company was able to hold its ground. The cigarettes business, which contributed nearly 61.55 per cent of its annual earnings in FY17, saw an increase of 4.79 per cent in its top line at Rs 8,954.94 crore during the quarter under review while the gross profit from this segment grew by 7.96 per cent at Rs 3,258.76 crore. This segment’s consolidated revenue growth for FY17, however, surpassed the growth in Q4 by 0.5 per cent with the net income from this sector standing at Rs 35,877.66 crore in FY17, against revenue of Rs 34,062.67 in FY16.
However, ITC said the legal cigarette industry remained severely impacted due to the cumulative impact of steep increase in taxation, intense regulatory pressures and the tight liquidity conditions — especially in the wholesale channel — prevailing in the market during the latter half of the year.
The FMCG-Others business, despite a sluggish business environment, grew 6.45 per cent at Rs 2,885.76 crore as against earnings of Rs 2,710.78 crore in the year-ago period. However, in Q4, its gross profitability declined over 29 per cent at Rs 55.56 crore. On a consolidated basis, the decline in this segment’s profitability was the sharpest 70.52 per cent at Rs 26.15 crore. But, the top line grew 8.10 per cent at Rs 10,537.46 crore for the full financial year.
“The much anticipated pick-up in consumption expenditure on the back of good monsoons in 2016, low inflation and implementation of the recommendations of the Seventh Pay Commission did not play out fully. The incipient recovery in demand witnessed around the middle of the year was adversely impacted by the cash crunch, especially during the third quarter. Further, the industry had to contend with sharp escalation in the cost of major commodities in the midst of heightened competitive intensity, leading to compression in margins,” the company said.
The hotels business, with a 56.93 per cent increase in its gross profit at Rs 66.93 crore delivered the most impressive performance in Q4, while on a consolidated basis for FY17, the segment’s profitability stood at Rs 117.12 crore, which translates into a 90.09 per cent increase over FY16. The top line increased 6.48 per cent at Rs 386.52 crore in Q4, while the increase was 4.20 per cent at Rs 1,414.39 crore for the whole of FY17.
The performance of Paperboards, Paper & Packaging segment continued to be impacted by sluggish demand in the FMCG and legal cigarette industry. Zero-duty imports under Asean’s Free Trade Agreement, cheap imports from China along with capacity ramp-up by other industry players adversely impacted this segment’s revenues in Q4. The segment’s results, however, improved on the back of benign input costs and improved mix. In Q4, this segment registered a 4.39 per cent top line growth at Rs 1,372.73 crore while its profitability increased by 18.34 per cent at Rs 240.17 crore. For FY17, the top line reflected just 0.6 per cent growth at Rs 5,362.86 crore.
