Beating Street estimates, ITC posted an 18.73 per cent increase in net profit at Rs 3,481.90 crore during the quarter ended March 31, 2019, even as total revenue grew by 14.26 per cent to Rs 12,946.21 crore.
Profit and revenue during the corresponding quarter of the 2017-18 fiscal year stood at Rs 2,932.71 crore and Rs 11,329.74 crore, respectively.
In a statement, the company said strong growth in gross revenue was driven by trading opportunities in oilseeds, wheat and coffee in the agro segment.
It was also helped by higher volumes and improved realisations from the paperboards business vertical and improvement in earnings from the hotels segment.
According to Abneesh Roy, research analyst at Edelweiss Securities, while ITC hiked cigarette prices by 2-3 per cent, it registered a volume growth of 7-8 per cent on a year-on-year basis with sales growing at 11.13 per cent to Rs 5,485.92 crore.
“Owing to higher prices of capsule filer and leaf tobacco, margins have remained soft with earnings before interest and taxes (EBIT) margin seeing a compression of 73 basis points on a year-on-year basis,” Roy said. Despite this, ITC’s profits from the cigarettes business went up 9.99 per cent to Rs 3,855.95 crore during the quarter under review.
According to ITC, the introduction of new cigarette variants – Classic Rich & Smooth, Classic Verve Low Smell and Gold Flake NEO – have received positive response from the market and newly-introduced brands and variants like American Club, Players and Wave have strengthened market standing during the year.
Although impacted by slower rural sales, the fast moving consumer goods (FMCG) segment, driven by enhanced scale and product mix enrichment, posted an earnings before interest, tax, depreciation and amortisation (EBITDA) of 31 per cent at Rs 228 crore, while excluding sales of the John Players brand of apparel, the revenue from this segment went up by around 10 per cent.
Incidentally, it was the vision of Yogi Deveshwar, who passed away on Saturday, to make ITC a diversified conglomerate from a cigarette major which led the company to focus on its non-cigarette businesses and grow these verticals. While Bingo branded snacks, Aashirvaad atta, YiPPee noodles and Dark Fantasy Choco Fills biscuits were the key drivers of growth in the branded packaged foods businesses, the Engage brand of deodorants, Vivel and Fiama shower gels and bodywash as well as Savlon handwash reported good growth in the personal care products business.
During the quarter under review, total revenue from this segment stood at Rs 315.72 crore – up 7.28 per cent as compared to the earnings of Rs 3,051.82 crore during the January-March period of 2018. Pre-tax profit, excluding the sale of John Players, went up 30.10 per cent to Rs 130.49 crore.
The company said post-tax profit before exceptional items for the year is up by 13.8 per cent to over Rs 12,000 crore which is the highest growth in the past four years. The company has recommended a dividend of Rs 5.75 per share for the 2018-19 fiscal year.
Driven by increase in average room rates, improvement in occupancy and higher food & beverage revenue from existing hotels as well as addition of new properties to the portfolio, ITC posted a 24.94 per cent increase in this segment’s revenue to Rs 509.76 crore while pre-tax profit surged 17.49 per cent to Rs 88.67 crore.
ITC said it will be focusing on the ‘asset-right’ strategy, which envisages building world-class tourism assets while growing the footprint of managed properties.
During the last fiscal year, the company commissioned a luxury hotel – ITC Kohenur in Hyderabad – while the construction of ITC Royal Bengal in Kolkata is nearing completion and is expected to be commissioned in the first quarter of 2019-20.
Backed by its extensive sourcing network with the farmers and associated infrastructure in key crop growing areas, ITC’s agri business division posted an 18.77 per cent increase in profitability to Rs 147.24 crore while revenues were 16.17 per cent higher at Rs 2,100.93 crore.
On a consolidated basis, ITC’s total income during the 2018-19 fiscal year went up by 5.07 per cent to Rs 52,035.90 crore while its net profit grew by 11.69 per cent to Rs 12,835.90 crore.