The company said net profit for the second quarter was Rs 206.74 crore, against Rs 180.29 crore in the corresponding quarter of the previous year.

For the first six months of 1999-2000, net profit rose by 14 per cent to Rs 400.32 crore, from Rs 350.08 crore in the corresponding period last year.

Lowering of interest cost by 23 per cent and better cost management boosted its pre-tax profits by 22 per cent to Rs 633.42 crore in the first half from Rs 520.31 crore in the corresponding period of 1998-99.

ITC provided Rs 233.10 crore for tax in line with its conservative tax provisioning policy.

The company said: "Strategic cost management and gains of higher productivity have been key contributors to these results. Better working capital management and refinancing of high cost debt have resulted in interest costs being lower by Rs 18.71 crores during half year".

Interest cost decreased to Rs 63.72 crore in the half year to September 30, 1999, from Rs 82.43 crore in the corresponding half of last fiscal.

Last fiscal's high interest cost was on account of its exit from financial services business, for which cash outflow was in excess of Rs 800 crore.

For the second quarter, during which cigarette sales volumes decline because of the monsoons, ITC lifted net sales turnover by 9.44 per cent to Rs 944.48 crore, against Rs 863.03 crore in the corresponding quarter of 1998-99.

For the first half, gross sales turnover increased marginally to Rs 3873.80 crore from Rs 3832.49 crore in the corresponding period last year.

The company said it has strengthened its leadership position in cigarettes by pursuing a strategy of "continuous value addition to the consumer through investments in brand building and product upgradation to internationally benchmarked standards."

Despite overall marginal dip in domestic sales during the quarter to September 30, 1999, export volumes have gone up. According to the release, ITC's cigarette export volumes trebled to 705 million sticks during the first half to September 30, 1999, as compared with the same period in the previous year.

ITC's export turnover and foreign exchange earnings from hotel business was termed as satisfactory at Rs 328 crore to September 30, 1999. Globally, excess supply in leaf tobacco is expected to last till October 2000.

ITC said that its investments in the hotels business is on schedule, and will enable it to become a more complete and comprehensive hotel chain by ensuring a presence in locations with high potential.

ITC's Maurya Sheraton is the first hotel in the south-east Asian region to earn the coveted ISO 14001 certification for its environmentally sustainable development through Welcomenviron programme.

It has completed a comprehensive programme including preparation of contingency plans for eliminating any known risks to the company's information technology systems and equipment that could adversely affect its business continuity in regard to the Y2K issue.

The ITC scrip opened at Rs 771 at the Calcutta Stock Exchange and touched a day's high of Rs 798.90 before closing at Rs 779.60.

INSIGHT:

Operating profits boosts profits

A strong second quarter has helped ITC buoy earnings for the six months ended September 1999.

The cigarette major saw a healthy bottomline growth of 14.67 per cent with net profit at Rs 206.74 crore from sales of Rs 944.48 crore (up 9.44 per cent). Compare this with a 2.97 per cent drop in first quarter revenues.

Importantly, the bottomline has been driven by better operating profits, which analysts state has been due to the increased retail prices of cigarettes and also due to lower tobacco procurement prices.

-- Percy Dubash