Cigarettes-to-hotel-to-FMCG major ITC on Friday reported a 16.75% year-on-year rise in its standalone net profit to Rs 3,090.20 crore for Q3FY18. The revenue for the two periods are not comparable as these are stated after adjusting for GST for the current quarter, while the same was reported before providing for excise duty a year ago. Net profit were in line with market expectations after adjusting for an exceptional income of Rs 412.90 crore (post tax Rs 270 crore) on account of write-back of entry tax levied by Tamil Nadu, following a favourable Supreme Court order. Analysts had expected a profit of Rs 2,829 crore, according to Bloomberg. Tax expenses grew 17.8% to Rs 1,539.35 crore against Rs 1,307.47 crore a year ago, according to a stock exchange filing. ITC said the legal cigarette industry volumes were under severe pressure due to a sharp increase in tax incidence under the GST regime. “The sharp upward revision in the GST compensation cess on July 17, 2017, exacerbated the situation,” it stated. “Cigarette volumes for the quarter are estimated to have fallen by about 3%, in line with our estimate,” said Sameer Deshmukh, senior research analyst, Reliance Securities.
Operating profit from the cigarette business rose by close to 8% y-o-y to Rs 3,269.25 crore. Other FMCG businesses posted an operating profit of Rs 46.99 crore against an operating loss of Rs 19.66 crore a year ago, aided by an 11.8% y-o-y growth in revenue from this segment. Deshmukh said the reported net profit of the conglomerate was higher by 16.8% y-o-y mainly due to the exceptional income pertaining to reversal of entry tax levied by Tamil Nadu. “Excluding the same, net profit was in line with our estimate,” he added. ITC said Ebitda at Rs 3,904.50 crore registered a healthy growth of 10.1%. On its other FMCG business, the company said, “Positive swing of Rs 67 crore in segment profit is driven by enhanced scale and market standing, product mix enrichment and cost management initiatives.” “It may be recalled that the base quarter (Q3FY17) had witnessed reduced consumer offtake and trade pipelines in the wake of adverse liquidity conditions.
However, it is pertinent to note that the company’s FMCG-other businesses were relatively less impacted (revenue grew by 3.4% over Q3FY16) in the said period,” it averred. During Q3FY16, the conglomerate’s hotel segment showed improved performance. “Increase in ARR (average room rate), robust growth in food & beverage revenue aided segment revenue to grow by 10% on a comparable basis in the quarter. Improvement in room rates and operating leverage aided faster growth of approx 30% in segment results, notwithstanding gestation costs of ITC Grand Bharat and the recently commissioned WelcomHotel Coimbatore,” the company’s statement added.