Its gross revenue from sales for the July-September period grew 5.9% y-o-y at Rs 11,750.15 crore, which was below analysts’ expectations.
Beating market expectations, ITC on Thursday reported a robust 36.16% year-on-year jump in its standalone net profit to `4,023.10 crore for the second quarter ended September 30, buoyed by 44.5% y-o-y lower tax expenses. Apart from lower tax outgo on the back of corporate tax cuts, the diversified conglomerate got larger benefits in terms of a massive decrease in its total tax expenses in the September quarter this fiscal, due to ‘re-measured’ deferred tax liabilities.
The cigarette-to-FMCG-to-hotel major had posted Rs 2,954.67-crore net profit for the second quarter last fiscal. Its gross revenue from sales for the July-September period grew 5.9% y-o-y at Rs 11,750.15 crore, which was below analysts’ expectations.
The Kolkata-based conglomerate, in a media statement, said its deferred tax liabilities (net) as on March 31, 2019 and the estimate of tax expense for the year ending March 31, 2020 had been re-measured, mainly on account of its continued focus on ‘Make In India’ investments across sectors. The resultant impact is being recognised over the current and the remaining quarters of this financial year. “Consequently, tax expense for the current quarter and six months ended September 30, 2019 includes a credit of `340 crore,” ITC said in its stock exchange filing.
The company said it “posted a steady performance” during the September quarter amid a particularly challenging operating environment in the quarter, with further deceleration in economic activity accentuated by a drop in consumption, especially in rural areas, severe crunch in market liquidity conditions and disruptions/floods in several parts of the country.
The company said around 6% growth in its gross revenue for the quarter was driven mainly by paperboards, hotels and non-cigarette FMCG business (excluding the lifestyle retailing business). During the second quarter this fiscal, revenue from the company’s cigarette business grew close to 6% y-o-y at Rs 5,326.83 crore, while operating profit from the segment increased by over 7.41% y-o-y at Rs 3,844.45 crore during the period, according to the stock exchange filing.
The country’s largest cigarette maker in its statement said performance during the quarter reflected the persistent weakness in the overall demand environment, especially in rural markets and wholesale channel, and tight market liquidity conditions. “The business continues to introduce new variants and augment its product portfolio catering to continuously evolving consumer preferences. Key market interventions in recent times include the launch of innovative and differentiated offerings such as Gold Flake Neo and Classic Rich & Smooth in the premium end, deployment of focused offers under the
‘American Club’, ‘Wave’, ‘Player’s Gold Leaf’, ‘Pall Mall’ and ‘Flake’ trademarks to effectively counter competition in strategic markets,” it said.
During the quarter under review, non-cigarette FMCG business registered 4% y-o-y growth in its revenue to Rs 3,288.31 crore, while the segment posted a whopping 54.76% y-o-y growth in operating profit at Rs 90.46 crore during this period. Segment Ebitda grew by 39% to Rs 221 crore, with margins expanding by around 170 basis points (bps), despite stepped up marketing investments, gestation and start-up costs of new categories/new facilities, the company said, adding the non-cigarette FMCG business delivered a “resilient performance” during the quarter, which witnessed a further slowdown in consumption both in urban and rural markets.
“Categories with relatively higher rural salience were impacted the most. The company continued to mitigate the impact of the slowdown through several proactive measures such as enhancing direct reach, increasing the frequency of market servicing, introducing targeted offers for value seeking consumers, investing in fast growing channels such as modern trade/e-commerce and extending credit judiciously to select trade partners,” it informed.