Cigarettes-to-hotels conglomerate ITC on Wednesday missed street expectations for the quarter ended December 31, 2014, posting 10.47% year-on-year growth in net profit to Rs 2,635 crore, up from Rs 2,385.34 crore in the corresponding period a year ago.
Profit as well as revenue growth was impacted with the cigarette business witnessing tepid growth during the quarter.
The company posted merely 2.47% year-on-year growth in operating income to Rs 8,942.59 crore against Rs 8,726.85 crore in the year-ago period. It attributed muted growth in the FMCG-cigarette segment to steep hikes in excise and VAT.
“The company’s performance in Q3FY15 reflects, inter alia, the full impact of the steep hike in excise duty on cigarettes announced in the Union Budget 2014 and sharp increases in VAT on cigarettes by Tamil Nadu, Kerala and Assam effected during the quarter. Cigarette segment revenue, as a consequence, remained flattish during the quarter compared to same period last year,” it said in a release. While the cigarette segment’s revenue grew only 0.6% y-o-y to Rs 4,141.94 crore during October-December, analysts say volumes could have fallen by 12-16%.
Cigarettes’ ebit (earnings before interest and tax) growth fell to single digit during the quarter, up just 8.82% y-o-y during the period.
“The combined impact of the sharp increase in excise duty and VAT is exerting unprecedented pressure on the legal industry’s sales volumes,” ITC said in a statement.
The FMCG-Others segment registered healthy revenue growth of 11.4% amid continued weakness in discretionary demand. It said the branded packaged foods business posted \healthy growth in revenue and enhanced market standing, across categories, by leveraging the portfolio of differentiated and innovative products.
The Hotels segment registered growth of 4.7% on the back of a weak pricing scenario, in the backdrop of excessive room inventory in key domestic markets.
ITC said agri-business’ revenue degrew 10.6%, primarily due to lack of trading opportunities in Soya due to higher crop output in the US, Brazil and Argentina. Segment results, however, recorded growth of 16.3% on the back of improved realisations, mainly in leaf tobacco.
The Paperboards, Paper & Packaging segment was impacted by the slowdown in the FMCG and cigarette industry, it said. Consequently, segment revenue and profit were impacted during the quarter.
Following the weaker-than- expected results, the stock fell 5.01% to Rs 352.60 on the BSE.