FMCG conglomerate ITC reported a 3.6% y-o-y increase in the net profit to Rs 2,265.44 crore in the June quarter against a net profit of Rs 2,186.39 crore in the corresponding period last fiscal. The company registered a growth in profit despite a sluggish demand in FMCG, cigarette, paper and paper boards and agricultural products as well.
ITC net sales fell 7% y-o-y to Rs 8,505.53 crore against Rs 9,164.42 crore in the same period last fiscal. The company’s performance in the quarter was subdued due to unprecedented pressure on the business of legal cigarettes, sluggish demand condition in the FMCG industry and lack of trading opportunities in wheat and soya, according to a company statement.
However, profit before tax grew 5.1% y-o-y to Rs 3,432.23 crore against Rs 3,265.67 crore in the June quarter last fiscal. Earning per share stood at Rs 2.83 during the quarter, up from Rs 2.75 in the same period last fiscal.
While the FMCG segment registered a revenue growth of 12.2% y-o-y, hotel segment registered a revenue growth of 15.7% y-o-y. The hotel segment’s revenue was backed by strong growth in room occupancies and food and beverage revenues. The revenue growth in hotel segment was despite of the impact of the gestation cost of ITC Grand Bharat commissioned in November last year.
Agri business revenues were impacted by lack of trading opportunities in wheat & soya. But the segment’s profit was up 15.5% y-o-y because of superior product mix and higher realisations.
Paperboards, paper and packaging segment was impacted by the slowdown in the FMCG and cigarette industry, and reduction of import duty under various regional free trade agreements.
ITC said its B Natural range of juice has garnered impressive consumer franchise in a relatively short time. The company wants to leverage its agri-sourcing expertise and deep distribution reach to scale up the brand. Personal care product business posted a robust revenue growth driven by improved volumes and enriched mix of products. The company has fully integrated its recently acquired trademarks — Savlon and Shower to Shower — with its existing operations.
According to ITC, the Cigarette business faced unprecedented pressure with a sharp 115% cumulative increase in excise duty on filter cigarettes of length 65 mm. This has widened the price difference between legal and illegal cigarettes and made it difficult for the legal cigarette industry to counter the unabated growth of illegal cigarettes. The share of legal cigarettes in overall tobacco consumption has progressively fell from 21% in 1981-82 to below 12% in 2014-15 even as overall tobacco consumption in India has increased, said an ITC statement, adding that the rise of illegal cigarette sales has sub-optimised revenue potential from the tobacco sector.
According to a recent study, it is estimated that products representing 68% of overall tobacco consumption in the country escape taxation as they are manufactured in the unorganised sector with little statutory oversight, ITC said.
In the hospitality sector, although ITC witnessed a growth in occupancy rates, pricing scenario remained weak in the backdrop of excessive room inventory in key domestic markets. Sluggish macroeconomic environment both in India and key source markets also created a challenging operating environment.
Construction activity at the luxury hotel projects in Kolkata and Hyderabad were on and requisite approvals were also in place to commence excavation works for the construction of a luxury hotel – ITC Narmada in Ahmedabad. In the paper and paper-board segment, ITC recently completed in-house pulp mill expansion project and has made it fully operational to reduce dependence on imports. ITC has embarked on setting up India’s first bleached chemical thermo-mechanical pulp mill at its Bhadrachalam unit, an official said.