ITC net up 15.6% on agri, paper, cigarette sales

Meeting Street expectations, tobacco-to-hospitality major ITC has reported net profit of Rs 2,186.4 crore in the June quarter - a growth of 15.6 per cent compared to Rs 1,891.3 crore in the year-ago period.

Net sales grew 25 per cent to Rs 9,164.4 crore against Rs 7,338.5 crore in June 2013.

The more-than-expected net sales were aided by good performance by the agri, paper and cigarette segments. Ebitda (earnings before interest, taxes, depreciation and amortisation) margin during the quarter under review stood at 34.8 per cent, which was below expectations.

The cigarette business, which drives 83 per cent of ITC’s pre-tax profits, reported a sales uptick of 19 per cent at Rs 4,201.06 crore. The segment recorded an increase of 21.4 per cent in its pre-tax profits at Rs 2,721.75 crore in the April-June 2014 quarter.

However, cigarette volumes continued to show a declining trend. According to analysts, cigarette volumes dropped by three per cent during the June 2014 quarter compared to the corresponding year-ago quarter. The drop was two per cent in the last quarter of FY14.

Cigarette volumes are expected to remain sluggish, especially after the government imposed a 11-72 per cent excise hike in the Budget for FY15.

“The steep increase in excise duty on cigarette for the third year in succession, as announced in the Union Budget 2014, along with further increase in value-added tax (VAT) on cigarette by some states during the quarter, will exert further pressure on legal industry volumes and sub-optimise the revenue potential from the tobacco sector. Further, the sharp increase of 72 per cent in the excise duty rate applicable for filter cigarette of length not exceeding 65 mm will make it extremely difficult for the legitimate industry to counter the menace of illegal cigarette, which continue to grow unabated in the country,” the company said in a statement.

The non-cigarette business, which had recorded a maiden profit in FY14, reported a loss of Rs 15.6 crore over revenues of Rs 1,934.6 crore.

Sales from the segment grew 11 per cent, which aided the higher-than-estimated overall growth in net sales, said experts.

“Post Budget, the first-quarter result is usually volatile and a clearer picture would emerge in the quarters ahead. However, on an overall basis, ITC’s performance has been in line with expectations and it remains a top pick among the large-cap stocks,” said Abneesh Roy, associate director, Edelweiss Capital.

The hospitality business continued its sluggish performance as the segment recorded a loss of Rs 12 crore, while revenues stood at Rs 248.7 crore - almost a flat growth.

Agri business reported a 50 per cent jump in sales at Rs 3,296.06 crore against Rs 2,188.98 crore in the first quarter of FY14. Profits from the segment stood 1.5 per cent higher at Rs 202.6 crore during the quarter under review.

Paperboards, paper and packaging segment recorded a 9.26 per cent rise in profits at Rs 274.9 crore on sales of Rs 1,288.5 crore, which was up 10.8 per cent.