2 min read.Updated: 22 May 2015, 11:42 PM ISTManish Basu
Cigarette sales rise 3.23%, revenue from key segments such as paper, paper board and farm commodities fall
Kolkata: ITC Ltd, India’s biggest cigarette maker, on Friday reported a lower-than-expected fiscal fourth quarter net profit as a steep hike in cigarette taxes and prices hit sales growth.
Net profit rose 3.65% year-on-year (y-o-y) to ₹ 2,381.18 crore in the three months ended 31 March, said ITC, which also makes packaged consumer goods and runs hotels. Revenue for the quarter, at ₹ 9,292.78 crore, was barely changed from the same period a year ago.
Cigarette sales, at ₹ 4,210.7 crore, increased just 3.23% y-o-y and revenue from other key segments such as paper, paper board and farm commodities declined from the previous year.
Analysts had been expecting the company to earn a net profit of ₹ 2,519 crore, as per Thomson Reuters data.
Adjusted for its social sector spending, ITC said its net profit in the March quarter was up 7.8% over the same period a year earlier.
For the full year, ITC earned a net profit of ₹ 9,607.73 crore, up 9.3% on revenue of ₹ 36,507.4 crore, up 9.8%. The company’s board on Friday approved a dividend payout of ₹ 6.25 per share.
The results were announced after the stock markets had closed. ITC’s share closed with a 0.34% gain, at ₹ 328.45 on the BSE.
The results for the March quarter are “pretty disappointing", said Ashish Upganlawar, an analyst at Elara Capital India Pvt. Ltd. Cigarette sales by volume appear to have dropped 13-14% from a year ago, impairing ITC’s profitability, he said, adding that the dynamics of the cigarette business were not likely to change in the foreseeable future.
Not just in India, a decline in cigarette consumption abroad also had an impact on ITC’s revenue from export of leaf tobacco.
March quarter revenue from its farm commodities business fell 28.75% y-o-y to ₹ 1,427.89 crore. Leaf tobacco exports in fiscal year 2015 declined 11% from the previous year to 210 million kg, ITC said in a statement.
ITC’s March quarter revenue from its non-cigarette consumer goods business grew 10.9% y-o-y to ₹ 2,566.51 crore and generated a pre-tax profit of ₹ 48.52 crore (compared with ₹ 43.09 crore in the same period a year ago) despite subdued demand.
For the full year, the company clocked ₹ 9,011.25 crore in revenue from the segment, up 11.26% from the previous year. Pre-tax profit from the segment, at ₹ 34.08 crore—compared with ₹ 21.82 crore in the previous year—was impressive, the company claimed, in light of the cut in discretionary spending, sluggish demand for branded packaged food and expenditure on launching two new products.
The company’s paper and paper boards segment suffered due to weak demand for its products from among consumer goods makers and cheap imports. March quarter revenue from the segment at ₹ 1,202.58 crore was 4.64% lower than the same period a year ago. Net profit, though, was marginally higher, at ₹ 190.56 crore.
ITC said its hotel business benefited from the “marginal improvement in the occupancy rate", but room tariffs remained depressed because of high inventory in key markets. In the March quarter, revenue from its hotels grew 8% y-o-y to ₹ 346.42 crore, but pre-tax profit was 29.75% lower at ₹ 42.04 crore.