ITC profit rises in line with forecast, up 5.6%

In line with Street estimate, ITC posted a 5.6 per cent increase in its net profit at ~2,639.84 crore for the quarter ended September 30, 2017, as against ~2,500.03 crore in the corresponding quarter of 2016-17.

The company's total income during the second quarter of the current financial year stood at ~10,258.13 crore, versus ~14,091.96 crore in the year-ago period.

ITC said its total income from operations during the quarter under review is not comparable with the previous period due to the introduction of goods and services tax (GST) from July 1.

"After introduction of GST, central excise, value-added tax (VAT), etc, have been replaced by the one unified tax. In accordance with Indian Accounting Standards 18 and Schedule III of the Companies Act, 2013, GST, GST compensation cess and VAT, etc, are not included in the total income from operations," it added.

"The reporting standards have changed for the company and, hence, a comparison on a year-on-year basis cannot be done," Gaurav Jogani, analyst with Prabhudas Lilladher said.

However, Abneesh Roy, research analyst with Edelweiss Securities, stated that on a year-on-year basis, net revenue of the company is up 6.8 per cent at ~10,314 crore.

A note submitted by ITC while declaring its quarterly performance stated that the company's gross sales value, which includes rebates and discounts, stood at ~16,391.58 crore against ~15,769.89 crore reported in the second quarter of 2016-17, a growth of 3.9 per cent.

"Pressure on the legal cigarette industry escalated significantly during the quarter on account of the steep increase in tax under the GST regime and additional burden on the business due to GST transition costs," ITC said.

Revenue from the cigarette business, which accounts for 47 per cent of the top line, stood at ~4,554.21 crore. ITC reported ~8,528.47 crore from this business a year ago. Profits from this business soared 2.3 per cent to ~3,291.67 crore from ~3,216.88 crore reported in the year-ago period, despite projected decline in volume.

Roy said this line of business, which has met his estimates exactly, was impacted by price hikes causing a six per cent dip in sales volume on a yearon-year basis.

The non-cigarette FMCG (fast-moving consumer goods) vertical, which comprises of confectionery, dairy, beverages and personal care products, entered the green zone, posting a ~20.49-crore net profit as against a loss of ~3.26 crore in the same period of 2016-17.

Profits and revenue from its hotel business rose 552.30 per cent and 0.96 per cent to ~4.24 crore and ~300.18 crore, respectively, while the profit from agriculture business dipped 13.73 per cent to ~256.20 crore. The paperboards, paper and packaging business posted a growth of 18.21 per cent in its profit at ~274.19 crore.

Benefitting from the GST regime, the firm's total expenses went down 38.50 per cent to ~6,313.84 crore against an expenditure of ~10,265.74 crore a year ago.