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No huff and puff: ITC records smooth 21% jump in Q2 profit

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SummaryFMCG major ITC,which makes four out of every five cigarettes sold in India, posted a 21% rise in net profit year-on-year for the second quarter of 2012-13 at R1,836 crore driven by strong growth in cigarettes.

FMCG major ITC,which makes four out of every five cigarettes sold in India, posted a 21% rise in net profit year-on-year for the second quarter of 2012-13 at R1,836 crore driven by strong growth in cigarettes.

Net sales for the July-September quarter were up 20% y-o-y to R7,146 crore, a company release said, while profit from operations grew 21.8% to R2,499 crore. Analysts said the overall operating margins had improved by 72 bps during the quarter.

The ITC stock crossed the 52-week high level in the afternoon and closed 2.09%, up from Thursday's close, at R297.50. For the second quarter, gross cigarette sales were up 17% y-o-y to R6,419 crore.

Analysts said cigarettes business margins grew by 89 bps to 32.4%. The company said “the continuing discriminatory taxation and regulatory framework against cigarettes” was a major cause of concern, and that industry volumes had come under severe pressure.

It said during the quarter, several initiatives were launched across the brand portfolio and that the launches in the new filter segment (cigarette length not exceeding 65 mm) have met with favourable consumer response and being rolled out in target markets.

The non-cigarette FMCG segment also registered a 26.4% growth y-o-y in revenues during the quarter to R1,700 crore. Losses in non-cigarette FMCG businesses were reduced to R30 crore in the quarter from R56 crore in the same period last fiscal.

But while cigarettes and non-cigarettes FMCG businesses did well, hotels continued to be under pressure, hit by the global and domestic meltdown. Gross sales in hotels were up just 3% y-o-y to R217 crore and profit plumetted to R15 crore from R43 crore.

The hospitality sector continued to be adversely impacted by the weak economic conditions prevailing in key international source markets and India on the one hand and significant additions to room supplies in key Indian cities on the other, a company release said.

Among ITC's other businesses, agri-business sales were up 41% y-o-y to R2,024 crore. But paper boards, paper and packaging sales saw growth of 6% y-o-y to R1,122 crore, and a significant fall in margins by 226 bps. The paper boards, paper and packaging profit slipped 2% y-o-y to R283 crore. A steep hike in input prices particularly that of wood impacted profits, the company said.

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