Cigarettes-to-FMCG major ITC on Friday reported a 12.13% year-on-year rise in its standalone net profit to Rs2,669.47 crore for the quarter ended March 31, 2017, from Rs2,380.68 crore in the period year ago as its revenue from operations during the quarter grew 6.15% y-o-y, which was broadly in line with market expectations.
The country’s largest cigarette maker’s revenue from operation during the March quarter rose to Rs15,008.82 crore from Rs14,138.78 crore during the year-ago period. The company, in a statement, said it saw a modest recovery in the performances during the period under review after severe disruption in operations in the December quarter last fiscal due to currency crunch post demonetisation. However, wholesale channel and rural markets remained sluggish.
While cigarette revenue grew 4.79% y-o-y at Rs8,954.94 crore during the January-March period, other FMCG business revenue posted a higher 6.45% y-o-y growth at Rs2,885.76 crore during this period, the company said in a BSE filing. Operating profit from the cigarette business increased by close to 8% y-o-y to Rs3,258.76 crore during the quarter under review.
According to analysts, cigarette volume growth during the period might be in the range of 1-2%, although the company made a price hike during this period.
Other FMCG business posted a de-growth of more than 29% y-o-y in its operating profit to Rs55.56 crore during March quarter last fiscal against Rs78.60 crore in the corresponding period previous fiscal. However, the diversified conglomerate’s EBITDA during the quarter posted a 7.5% y-o-y increase at Rs3,875 crore.
The company, in the statement, said despite the extremely challenging operating environment, it retained its leadership position in the cigarette industry and improved its standing in key competitive markets across the country. “This demonstrates the resilience of the company’s strong portfolio of brands, superior execution of competitive strategies, relentless focus on value creation through innovation and deep consumer insights,” it said, adding some of the strategic initiatives during the year include the launch of Gold Flake Kings Blue Tropical Switch, Classic Citric Burst and Classic Tangy Burst, among others.
ITC said the FMCG industry witnessed further deceleration in growth rate during the last financial year with demand conditions remaining subdued for the fourth successive 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 7th 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,” it added.
On its hotel business, the company said the operating environment in the hospitality sector remained challenging during the year. “While second half initially indicated signs of pick-up in the Hotels industry, collateral impact on the economy on account of currency crunch limited the recovery. Segment Revenue recorded a growth of 4.3% during the year driven by improvement in average room rates and higher Food & Beverage sales,” it informed.
On Friday, ITC’s scrip rose 2.99% to end the day at Rs308.65 on the BSE. The company announced the results during normal market hours.