ITC Q4 profit rises to Rs2,669 crore

Kolkata: Cigarettes and consumer goods maker ITC Ltd reported a 12.1% increase in fourth-quarter net profit on Friday, helped by excise duty savings and a “modest recovery” in consumption after “severe disruption” in the December quarter due to demonetization.

Net profit jumped to Rs2,669.47 crore, or Rs2.19 per share, in the March quarter from Rs2,380.68 crore, or Rs 1.96 per share, a year earlier, helped by savings of nearly Rs500 crore in excise duty.

Gross revenue grew 6.1% to Rs15,410.92 crore in the quarter from Rs14,510.01 crore a year earlier, despite “persistent weakness in the wholesale channel and rural markets”, the company said in a statement.

ITC’s shares rose to hit a 52-week intraday high of Rs313.40 each, before closing 3% higher at Rs308.65 on BSE, while the Sensex gained 0.9% to close at 31,028.21 points.

Excise duty payout for the March quarter was at Rs3,883.28 crore compared with Rs4,382.08 crore a year ago, a decline of 11.3%.

ITC’s earnings were in line with analyst expectations.

Broking firms such as HDFC Securities Ltd, Credit Suisse India Pvt. Ltd, Kotak Securities Ltd, Edelweiss Securities Ltd and Motilal Oswal Securities Ltd had in separate research reports said ITC was expected to report a net profit of Rs2,578-2,816 crore for the March quarter.

ICICI Securities said in a report on Friday that ITC’s operating profit margin for the March quarter remained flat, and that it was around 125 basis points lower than its estimates. A basis point is 0.01%.

The decline in excise duty payout possibly indicates that a substantial section of smokers had switched to 64mm cigarettes, which attract lower excise duty, said ICICI Securities.

ITC said it beat sluggish demand to register a 6.6% growth in gross revenue and a 9.4% growth in net profit for the full year. Gross revenue for fiscal year 2017 jumped to Rs57,434.37 crore from Rs53,713.83 crore a year ago.

Net profit for the full year was at Rs10,200.9 crore, or Rs8.38 per share, compared with Rs9,328.37 crore, or Rs 7.70 last year.

The board has recommended a dividend of Rs4.75 per ordinary share of Re1 each for the fiscal year year ended 31 March 2017.

Revenue from cigarettes at Rs8,954.94 crore was up 4.8% year-on-year, but pre-tax profit from the segment at Rs3,258.76 crore jumped 7.95% as operating profit margin expanded by 107 basis points to 36.39%. The cigarette business was hurt by a “steep increase in taxation, intense regulatory pressures and tight liquidity conditions in the wholesale channel”, ITC said in a statement.

Revenue from other consumer goods at Rs2,885.76 crore was up 6.4% year-on-year but pre-tax profit from the segment plummeted 29.3% from the previous year to Rs55.56 crore. ITC said a “sharp” increase in input costs, gestation cost of new launches—such as juices, dairy products and coffee—and “heavy discounting” in branded apparel impacted earnings from the segment.

March quarter pre-tax profit from ITC’s hotels division jumped 56.9% year-on-year to Rs66.93 crore, even as revenue grew only 6.4% to Rs386.52 crore. The company said it witnessed signs of a turnaround in the second half of the year, but the recovery was hobbled by “collateral impact on the economy on account currency crunch”.

Full-year revenue from the hotels business grew 4.3% to Rs1,341.73 crore, thanks to improvement in average room rate and higher sales of food and beverages. Pre-tax profit for the full year at Rs110.95 crore was almost twice as much as the firm earned from the segment last year.

March quarter revenue from agricultural commodity sales rose 6.1% year-on-year to Rs1,918.49 crore but pre-tax profit from the segment fell to Rs134.92 crore from Rs170.32 crore a year ago. The company said earnings were impacted by a decline in leaf tobacco exports from India to an eight-year low of 200 million kg.

The paperboards, paper and packaging segment turned in a pre-tax profit of Rs240.17 crore in the quarter till 31 March, up 18.33% year-on-year, while revenue grew 4.3% to Rs1,372.73 crore. ITC said the segment was impacted by “sluggish demand” for consumer goods and cigarettes, and cheap imports from China.