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Growth in cigarette sales helped ITC report net profit of Rs 2,425 crore in the July-September quarter, an increase of 8.7 percent.
In the same period last year, ITC’s net profit was Rs 2,230 and net sales were Rs 7,775.79.
This year, for the July-September quarter, its net sales increased 14.8% to Rs 8,930.32 crore.
“After adjusting for the liability assumed in the second quarter of FY14 (with respect to rates and taxes and related interest relating to previous years, totaling 192.68 crore rupees), the underlying profit growth pre-tax and net income in the quarter was 17.8% and 15.6%, respectively, â€the company said in a statement.
Analysts said the results were in line with expectations. “One important thing about ITC is that they were also able to maintain their operating margin this quarter,†said one analyst.
The action ended the day slightly higher at Rs 355 from the Sensex’s 1.9% rise on Friday.
While analysts were skeptical of the cigarette segment due to the steep rise in prices, results showed revenue increased 14.15% to Rs 4,250.86 crore from Rs 3,723.81 crore of Rs in the corresponding quarter of last year.
The ITC had raised the price of its brands of cigarettes by up to 23 percent in August due to a hike in excise duties.
“It was a difficult business environment exacerbated by a sharp increase in excise duties on cigarettes for the third year in a row, as announced in the Union budget,” the company said in a statement. The Non-Cigarette Fast Turning Consumer Goods (FMCG) segment, which includes packaged food, personal care products, education and stationery, safety matches, and incense sticks (agarbattis), recorded revenue growth of 11.9% but also recorded a loss of Rs 10.31 crore. “Overall, this industry has been affected because of consumer sentiment. With lower inflation and growing urban demand, the company will experience a better growth rate in this segment in the second half of the year, â€the analyst said.
The hotel business posted a sluggish performance with almost flat revenue growth of 5.9%. He also suffered a pre-tax loss of Rs 9.58 crore. The company blamed him on the additional charge of Rs 13.4 crore towards the additional depreciation charge for the quarter due to the revision of the useful life of fixed assets in accordance with the provisions of Schedule II of the Act on 2013 companies. The company’s agricultural business sector experienced higher-than-expected growth of 16.14% due to better wheat, soybean and coffee trading opportunities, the company said.
“We note that this quarter’s net sales figures reflect the impact of inventories held before budget. As a result, the growth in net sales during the quarter does not give a true picture of medium term growth in the context of the price increases affected during the quarter, following the Union budget â€, said Ritwik Rai , FMCG Analyst, Kotak Securities.
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