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Business News/ Companies / Company-results/  ITC’s Q2 profit rises 15.6% to Rs2,425.16 crore
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ITC’s Q2 profit rises 15.6% to Rs2,425.16 crore

Healthy growth in sales of farm commodities, packaged food and cigarettes helped profit grow

ITC’s net revenue for the quarter at `8,930.32 crore was up 14.8% over a year ago. Its non-cigarette consumer goods business clocked a revenue of `2,196 crore, up 11.9% year-on-year, which according to analysts, was ahead of competition. Photo: Indranil Bhoumik/MintPremium
ITC’s net revenue for the quarter at `8,930.32 crore was up 14.8% over a year ago. Its non-cigarette consumer goods business clocked a revenue of `2,196 crore, up 11.9% year-on-year, which according to analysts, was ahead of competition. Photo: Indranil Bhoumik/Mint

Kolkata: ITC Ltd, India’s biggest cigarette maker, which also has interests in packaged consumer goods and hotels, on Friday posted a net profit increase of 15.6% (adjusted for exceptional items) in the fiscal second quarter as it boosted sales in “a challenging business environment".

Net profit rose to 2,425.16 crore in the three months ended 30 September, the firm said. The profit was notched up on a 14.8% increase in net revenue to 8,930.32 crore, it added.

In the corresponding quarter of 2013-14, the company had written back a tax provision—an accounting adjustment that shored up its net profit. On a like-for-like comparison, which must exclude this one-off accounting (not real cash) gain, ITC’s net profit in the September quarter rose 15.6% from a year ago.

The Kolkata-based company had been expected to post a net profit of 2,443.3 crore on net revenue of 9,043.4 crore, based on a Bloomberg poll of 31 analysts.

ITC said it had been another quarter of “impressive growth in revenue and profits, notwithstanding a challenging business environment exacerbated by a steep hike in excise duties on cigarettes for the third year in succession".

The government raised excise duty by 72% on filter cigarettes of length not exceeding 65mm in the July budget.

Cigarette sales in the September quarter grew 14.15% year-on-year (y-o-y) to 4,250.86—an indication that smokers continue to cough up regardless of price hikes. Pre-tax profit from the segment at 2,882.06 was 19.5% higher than a year ago.

The company’s non-cigarette consumer goods business earned revenue of 2,196 crore in the quarter, up 11.9% y-o-y. However, the segment registered an operating loss of 10.31 crore during the quarter versus a loss of 12.69 crore a year ago.

ITC’s shares ended barely changed on Friday, edging up 0.11% to close at 355.25 each on BSE on a day the benchmark Sensex advanced 1.9% to a record 27,865.83 points.

This reflects the market’s disappointment at ITC’s revenue growth in the September quarter, said Rajesh Agarwal, head of research at Eastern Financiers Ltd, a broking firm. The market, according to him, had been expecting revenue growth of around 20%.

According to Edelweiss Securities Ltd’s estimates, cigarette sales contracted 4-5% by volume, but even so, the segment’s profit margin expanded by 304 basis points. A basis point is 0.01%. Given the sharp increase in excise duty, the performance of the segment “is very impressive and meets our expectations", said Abneesh Roy, associate director (institutional equities) at Edelweiss.

ITC said its hotels business continued to suffer from a “weak…pricing environment", and registered a pre-tax loss of 9.58 crore in the September quarter against a profit of 8.72 crore a year ago.

Still, net revenue from the segment rose 5.9% to 261.59 crore. The company said it provided an additional 13.4 crore towards depreciation of fixed assets of the hotels business.

Revenue from the paper business grew 8.9% to 1,284.07 crore, thanks to better capacity utilization and product mix, according to ITC. Pre-tax profit from the segment at 242.14 crore was 9.7% higher than a year ago, which, according to analysts, was impressive in view of the increase in input costs.

Sales of farm commodities grew 16.14% y-o-y to 2,058.67 crore, but because of a contraction in profit margin, the segment’s pre-tax profit grew only 4.8% to 298.25 crore.

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Published: 31 Oct 2014, 03:56 PM IST
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