Net sales recorded 3.44% year-on-year increase at R9,102.66 crore in the December quarter
Missing street expectations, cigarettes-to-hotel major ITC on Friday reported a marginal rise in its net profit to Rs 2652.82 crore during the quarter ended December 31, 2015 from Rs 2,635 crore for the same period a year ago, on the back of subdued revenue growth as its cigarettes business remained muted and sluggish demand environment prevailed in the FMCG sector.
The Kolkata-based conglomerate’s net sales recorded 3.44% year-on-year increase at Rs 9,102.66 crore in the December quarter this fiscal as against Rs 8800.22 crore during the corresponding period last fiscal, according to a BSE filing.
ITC’s scrip on Friday closed at Rs 308.65, up 0.69% on BSE from the previous close.
In a statement, the company, India’s biggest cigarette maker, said the performance of the cigarettes business remained muted during the quarter due to taxation and regulatory headwinds facing the legal cigarette industry in the country.
The company’s revenue from its cigarette business during the third quarter grew by just 5.7% at Rs 4,380 crore. Cigarette segment contributes over 45% to the conglomerate’s total revenue.
The company stated that the high incidence of excise duty and VAT on cigarettes, at a per unit level, was exerting severe pressure on legal industry volumes even as illegal trade grew unabated. “It is pertinent to note that steep increases in Excise Duty on cigarettes in recent years have resulted in widening the differential in Excise Duty rates (on a per kg. of tobacco basis) between cigarettes and other tobacco products from 29 times in 2005/06 to over 53 times currently,” it added.
The company’s FMCG-Others segment, which includes branded packaged foods, apparel, personal care products, and education and stationery products, registered a revenue growth of 7.1% y-o-y during the quarter.
“Weak demand – particularly in rural markets – coupled with a price deflationary environment and supply chain disruption caused by heavy rainfall and floods in Chennai impacted revenue growth,” ITC said.
The company said most categories in the FMCG-Others segment witnessed expansion in gross margin driven by product mix enrichment and benign input costs. However, segment results were impacted by gestation costs of new categories such as juices, gums and dairy and continuing brand investments towards communicating the superior value proposition offered by YiPPee! Noodles.