ITC net profit beats estimates; Sanjiv Puri to take over as CEO

ITC’s net profit grew 5.7% over the previous year to Rs2,646.73 crore; Sanjiv Puri’s appointment as CEO will be effective 5 February


ITC had posted a net profit of Rs2,503.76 crore during third quarter last fiscal. Photo: Reuters
ITC had posted a net profit of Rs2,503.76 crore during third quarter last fiscal. Photo: Reuters

Kolkata: ITC Ltd on Friday set the stage for a change of guard at the top of its hierarchy for the first time in more than two decades when its board approved the elevation of chief operating officer Sanjiv Puri to chief executive officer.

The appointment of Puri, 54, who has been with the company for more than three decades, will be effective 5 February. Executive chairman Y.C. Deveshwar, who has led the company since 1996, will become non-executive chairman.

The company said earlier this week that its board would consider a proposal to split the post of chairman between non-executive chairman and CEO, indicating that Puri was in the line to take the helm.

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Deveshwar, who led ITC, India’s largest cigarette maker, in its diversification into hotels and packaged consumer products, initially battling resistance from a section of shareholders, will continue to chair the company’s board but only as a mentor to a new leadership.

The board decided on the change on the day it met to consider ITC’s December quarter earnings—the last with Deveshwar as executive chairman.

ITC said sales of all categories of consumer goods, including cigarettes, were disrupted by demonetization, which resulted in net profit growing at an uninspiring pace of 5.7% over the previous year to Rs2,646.73 crore. The company’s operating revenue grew 4.5% year-on-year to Rs13,470.89 crore.

Even so, the net profit beat Street expectations. ITC had been expected to post a profit of Rs2,563.80 crore, according to a Bloomberg survey of 23 brokers.

“The operating environment was extremely challenging,” ITC said in a statement. Demand for consumer goods slowed across all segments in the immediate aftermath of withdrawal of Rs500 and Rs1,000 notes. As liquidity improved with time, the company witnessed “substantial recovery in sales momentum towards the end of the quarter”.

After two quarters of recovery, cigarette sales were under pressure again, and December quarter revenue at Rs8,287.97 crore contracted 2.8% sequentially.

The business segment was impacted by “tight liquidity conditions”, ITC said, adding that the worst affected segments were biscuits, snacks, personal care products and branded apparel.

Compared with Hindustan Unilever Ltd, the leader in consumer goods, ITC’s results are impressive, said Naveen Kulkarni, head of research at PhillipCapital (India) Pvt. Ltd. Demonetization has disrupted sales for ITC as well, but its impact is limited, added Kulkarni.

Despite difficult market conditions, revenue from consumables (other than cigarettes) grew 3.4% year-on-year to Rs2,569.26 crore. The company’s hotels business posted a healthy profit of Rs42.15 crore, up 63.18% from a year earlier.

ITC on Friday said it was looking to enter the healthcare business. The board recommended shareholders’ approval for inclusion of healthcare as a potential line of business in its memorandum of association.

The company’s shares fell 2.78% to Rs257.50 on the BSE on a day the Sensex gained 0.63% to close at 27,882.46 points.

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