Kolkata: The country’s biggest cigarette maker ITC Ltd’s net profit for the December quarter has improved 26.67% over the previous year to Rs1,144.17 crore, driven by impressive performance by all its business segments except hotels.
Cigarettes contributed around 51.5% of ITC’s total third quarter (Q3) revenue of Rs4,531.85 crore, 18.22% higher than in the same period last year.
Net revenue from cigarettes at Rs2,331.63 crore was 17% higher than earlier, and pre-tax from the segment rose 15.5% to Rs1,309.84 crore.
This is evidence that cigarette sales have remained unaffected by the increase in prices of key brands, said Rajesh Agarwal, director, CD Equisearch Pvt. Ltd—a Kolkata-based stock broking firm. ITC’s pretax margin declined marginally during the quarter, but “remains at a healthy 56%”, he added.
ITC shares rose 2.13% to Rs249.35 on the Bombay Stock Exchange on Friday, while the benchmark Sensex index slumped 1.12% to 16,859 points.
“Investments are being progressed towards enhancement of quality, productivity and variety,” ITC said about its cigarette business in a statement. “Similarly, focused initiatives have commenced to strengthen the trade and distribution channels.”
ITC’s consumer goods business registered a healthy 23.5% year-on-year (y-o-y) increase in revenue, and narrowed its loss to Rs86 crore. In the previous Q3, the segment had a loss of Rs127 crore.
The firm, which also sells branded apparels, packaged foods and personal care products, said sales of its packaged foods grew 24% during the quarter. But it added that market conditions continued to be difficult and it is taking steps to mitigate the impact of rising commodity prices.
In December, India’s food price index rose by around 20%, the highest in a decade, and its benchmark wholesale price inflation increased 7.31%.
ITC’s revenue from its agri business jumped 45.6% to Rs905.16 crore in the latest third quarter, driven by robust sales of leaf tobacco. Export of leaf tobacco during the quarter increased by 194%, ITC said in a statement. Pretax profit from the segment more than doubled to Rs104 crore.
Revenue from the paper and paperboards segment during the quarter at Rs845.31 crore was 29.4% higher than in the same period last year, and pretax profit from it was 81% higher at Rs201.41 crore.
“The improvement in profitability was driven by an enriched mix of valued-added products…higher capacity utilization and lower input costs,” ITC said about the paper and paperboards segment.
ITC’s hotel business, however, continued to suffer. Revenue from the segment remained almost unchanged at Rs247.65 crore over a year ago, but its pretax profit was 16.22% lower at Rs76.29 crore.
“The (hotel) business continues to pursue an aggressive investment-led growth strategy recognizing the longer term potential of this sector and the need for increased room capacities commensurate with India’s economic growth,” ITC said.
ITC has acquired a 14.99% stake in EIH Ltd, which owns and manages the Oberoi group of hotels—India’s second biggest hotel chain, and has expressed its desire to integrate the two groups. ITC chairman Y. C. Deveshwar maintains his company wouldn’t consider a hostile takeover of EIH.
“What was most impressive in the results was the expansion in net margin,” CD Equisearch’s Agarwal said. ITC’s net margin expanded by 168 basis points over a year ago to 25.24%. One basis point is one-hundredth of a percentage point.