Net profit came in at ₹3,209 crore for the three months ended 31 December 2018, compared with ₹3,090 crore a year ago
Sales of cigarettes grew by 9.6% with profit before tax for the segment up by 7.8% to ₹8,409 crore during the quarter
New Delhi: ITC Ltd, India’s largest cigarette maker, on Wednesday reported a 3.85% increase in its December quarter standalone profit, backed by growth in the company’s cigarettes and consumer goods business.
Net profit rose to ₹3,209 crore in the three months ended 31 December from ₹3,090 crore in the year earlier, the company said. However, the company reported that in the corresponding quarter of last year it made a one-time gain of ₹270 crore. As such, profit for the quarter ended 31 December without considering exceptional items, represents a growth of 13.8%, it said.
Total income from operations of the maker of Sunfeast biscuits and Gold Flake cigarettes for the quarter grew by 15.7% from the year-ago period to touch ₹12,267 crore, according to a statement made by the company to the stock exchange.
The company’s revenue for the quarter was in line with analysts’ expectations, though margins, especially in the cigarettes business, fell below estimates.
Shares of the company dipped over 4% after its declared earnings for the quarter.
“Volume growth in ITC’s cigarettes business did not translate into double digit growth in EBIT (earnings before interest and tax). EBIT growth of 8.8% was marginally below our and street expectations," said Abneesh Roy, senior vice president, institutional equities, at Edelweiss Securities.
“Overall, the results are in line with our expectations in terms of revenue and slightly below expectations in terms of margin," brokerage firm Anand Rathi said in a post-earnings note.
During the quarter, the cigarettes business of ITC grew by 9.6% to touch ₹5,073 crore. However, EBIT margin for its cigarettes business narrowed 50 basis points year-on-year to 70.1% during the quarter.
“Segment results during the quarter include the impact of escalation in input costs largely on account of consumption of higher cost leaf tobacco crop and increased salience of capsule cigarettes in the sales mix," ITC said.
Meanwhile, the company’s FMCG business put up a strong performance during the quarter with double-digit revenue growth.
The business comprising packaged foods, stationery and personal care products grew by 11.5% to ₹3,200 crore, led by growth in categories such as wheat flour, snacks, premium cream biscuits, noodles, fragrances and liquids, the company said.
However, growth in the segment during the quarter was partially impacted by the “ongoing restructuring of the lifestyle retailing business and structural changes pertaining to the timing of trade promotions in the matches and agarbatti (incense stick) business", it said.
Analysts expect growth in the company’s FMCG business to “remain steady with further entry into categories such as flavoured drink (milk shakes) and premium chocolates priced," Varun Lohchab, an analyst at Jefferies India, said in a 23 January note.
Other segments put up a good show for ITC as well. Revenue from the paper and packaging business rose 20.5% to ₹1,542 crore, driven by strong demand and capacity augmentation in the value-added paperboard and decor segments.
Its agriculture business posted a revenue growth of 26% to touch ₹1,925 crore during the December quarter.
However, analysts cautioned of any impending tax hikes on sale of cigarettes in the upcoming budget.
“FY19 is proving to be a volume recovery year with no tax hikes and stable pricing for cigarettes business," Lohchab said. However, price hikes of cigarettes and a tax increase in the interim budget remain key monitorables, he said.