ITC Q1 net profit up 7.37%

Diversified conglomerate ITC on Thursday reported 7.37% rise in standalone net profit to Rs 2,560.50 crore for the first quarter ended June 30, 2017, driven mainly by revenue growth from FMCG and cigarettes business.

The company had posted a net profit of Rs 2,384.67 crore for the April-June quarter a year ago, ITC said in a BSE filing. ITC's net sales during the period under review was up 4.29% to Rs 13,722.21 crore, as against Rs 13,156.68 crore in the corresponding quarter of the previous fiscal. "The company delivered steady performance during the quarter against the backdrop of a challenging business environment marked by continuing pressure on the legal cigarette industry, sluggishness in demand for FMCG products exacerbated by de-stocking in trade channels ahead of implementation of GST," said ITC in a statement.

The Kolkata-headquarted company's total expenses were up 3.34% to Rs 10,332.61 crore as against Rs 9,998.18 crore of Q1 FY 2016-17. Revenue from total FMCG business including cigarettes increased 7.15% to Rs 11,375.05 crore from Rs 10,615.75 crore in the corresponding quarter a year ago. During the quarter, revenue from cigarettes increased 6.60% to Rs 8,774.16 crore, from Rs 8,230.60 crore in the year-ago period, despite "high incidence of taxation on cigarettes was further compounded by the steep increase in taxes announced by the GST Council."

However, despite "the extremely challenging operating environment" ITC sustained its leadership position in the industry through focus on delivering world-class products, continuous innovation & value addition, it claimed.
Revenue from 'FMCG-Others' segment was up 9.04% to Rs 2,600.89 crore during the April-June quarter as against Rs 2,385.15 crore in the year-ago period.

"Revenue growth was driven primarily by the Branded Packaged Foods Businesses, Personal Care and Stationery products partially offset by the ongoing restructuring of retail footprint and trade presence by the Lifestyle Retailing Business which also saw an early end of season sale and heavy discounting triggered by GST transition," it added. FMCG-other includes branded packaged food business as staples, snacks, dairy, beverages, confection. This segment also includes apparel, education and stationary products, personal care products, matches and agarbattis. ITC's revenue from hotel business was up 6.10% to Rs 304.89 crore during the quarter, as against Rs 287.36 crore in the corresponding period of last fiscal, driven by improvement in Average Room Rate and higher Food & Beverage sale.

Hotel business improved significantly "due to operating leverage and cost management. However, improvement in profitability was limited due to loss of revenue at certain properties on account of the ban on sale of liquor at outlets in close proximity to highways and gestation costs of the recently commissioned ITC Grand Bharat, Gurgaon." Contribution from agri business was down 1.20% to Rs 2,760.52 crore, as against Rs 2,794.08 crore of the corresponding quarter as it was impacted by lower crop output and adverse quality of the Andhra leaf tobacco crop due to drought in 2016 and limited trading opportunities in other agri-commodities.

Its paperboards, paper and packaging segment revenues was up 2.79% in Q1/FY 2017-18 to Rs 1,359.83 crore, as against Rs 1,322.90 crore, primarily due to sluggish demand conditions prevailing in the FMCG and legal cigarette industry and unabsorbed capacity in the paperboard market. "In addition, offtake of paperboards and carton packaging was impacted due to de-stocking of FMCG and pharma products in trade channels ahead of the transition to GST and the ban on sale of liquor from outlets located in close proximity to highways." it said.

Profitability in paperboards, paper and packaging segment, however, improved on the back of benign input prices and richer product mix, it added. Shares of ITC today settled at Rs 288.65 on BSE, down 1.62% from previous close.