ITC Q4 net profit up 5.7% at R2,495 cr

Cigarettes-to-hotel major ITC on Friday reported a 5.67% year-on-year rise in its standalone net profit to R2495.20 crore for the quarter ending March 31, 2016, from R2361.18 crore for the year-ago period as higher taxes and regulatory pressures impacted its cigarettes business and weak demand conditions prevailed in FMCG industry.

Beating street expectations, the Kolkata-based conglomerate posted 9.5% y-o-y growth in net sales at R10062.38 crore in the March quarter last fiscal as against R9188.25 crore during the corresponding period previous fiscal.

The company in a statement said improvement in performance during the quarter under review was driven by improved realisations, margin expansion, benign input costs and favourable base effect.

ITC’s scrip on Friday closed at R329.95, up 1.55% on BSE from the previous close after the company reported better-than-anticipated financial results for the quarter ended March 31.

The company, India’s biggest cigarette maker, saw its cigarettes segment revenue growth of over 10% y-o-y amid high incidence of taxation and regulatory pressures. Brokerage house KR Choksey Shares and Securities had earliar said the firm’s cigarettes volume was expected to decline by 2-3% in the fourth quarter last fiscal.

“The performance of the cigarettes business remained subdued during the year due to unprecedented pressure on the legal cigarette industry in India on account of the cumulative impact of steep increase in taxation and intense regulatory pressures,” the company statement said.

It also said over the last four years, the incidence of excise duty and VAT on cigarettes, at a per unit level, has gone up cumulatively by 118% and 142% respectively thereby exerting severe pressure on legal industry volumes even as illegal trade grows unabated.

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 5.36% y-o-y during the fourth quarter. “FMCG-Others segment revenue growth was impacted due to persistently sluggish demand environment, price deflationary scenario and trade pipeline synchronisation in the notebooks category. Growth in segment results driven by higher scale and gross margin expansion,” the statement added.

The company said demand conditions in the branded packaged foods industry remained sluggish during the last financial year with consumers curbing discretionary spending, headwinds in rural demand, heightened competitive intensity against the backdrop of decline in commodity prices and regulatory issues surrounding the Noodles industry. Despite such a challenging operating environment, ITC claimed that it has sustained its position as one of the fastest growing branded packaged foods businesses in the country.

During the financial year ended March 2016, the diversified conglomerate’s hotels segment revenue was up by 8.4%, aided by healthy growth in occupancy and Food & Beverage revenue. But segment results included the impact of gestation costs of ‘Grand Bharat’ and business disruption caused by heavy rains in Chennai during November/December, 2015.