ITC Q1 result: Profit rises 7.4% on subdued consumption ahead of GST rollout
Cigarette and consumer goods maker ITC Ltd on Thursday posted a muted 7.4% increase in quarterly net profit from a year earlier as consumption stayed subdued in the run-up to the implementation of the goods and services tax (GST).
The company reported a net profit of Rs2,560.5 crore in the quarter ended June compared with Rs2,384.67 crore in the same period last year. The profit was largely in line with analysts’ expectations. Revenue rose 4.1% to Rs13,800.42 crore.
GST was implemented with effect from 1 July. Many companies took an earnings hit in the June quarter because of supply-chain bottlenecks and other related issues.
Pre-tax profit from cigarettes rose 9% year-on-year to Rs3,274.14 crore; revenue from the segment grew 6.6% to Rs8,774.16 crore. It is an indication that the operating profit margin expanded, largely on account of price hikes.
The cigarette industry continued to reel under pressure from contraband as the government raised taxes, ITC said in a statement. “The revised rates of compensation cess (which came into force on 18 July)... has resulted in sharp escalation in tax on cigarettes, which is not in line with the fundamental principle of maintaining revenue neutrality under the GST regime,” ITC said. In the past six years, tax on cigarettes had gone up by “a staggering 202%... severely undermining” legal manufacturers of cigarettes and tobacco farmers, the company claimed.
Revenue from ITC’s non-cigarette consumer goods business jumped 9% from a year ago to Rs2,600.89 crore and helped the segment register an operating profit of Rs5.43 crore compared with a loss of Rs4.52 crore in the same period last year.
Revenue growth in the segment was driven largely by branded packaged foods, personal care and stationery products, the company said in its statement, adding the jump in revenue helped mitigate the effects of increased input costs and sustained investments in new products such as juices and chocolates.
ITC’s hotels business turned in an operating profit of Rs5.31 crore, up from Rs1.22 crore in the same period last year, thanks to better cost management. Segment revenue at Rs304.89 crore was up 6.1% over last year. ITC said the business was impacted by the ban on sale of alcohol at outlets within 500m of national highways.
The performance of the paper, paperboards and packing segment was impacted by “sluggish demand” for consumer goods and cigarettes, ITC said. The segment clocked revenue of Rs1,359.22 crore, almost unchanged from a year earlier.