ITC Q4 net up 10% to ~29.33 billion

Diversified conglomerate ITC Ltd posted a 9.89 per cent rise in its net profit at ~29.33 billion for the quarter ended March 31, 2018, with a total revenue, inclusive of other income, at ~113.30 billion. The net profit during the corresponding quarter of 2016-17 stood at ~26.69 billion, backed by a revenue of ~154.11 billion.

The company’s results are in line with street estimates.

The company said owing to the GSTroll-out, itsrevenue was not comparable. On a comparable basis, Gross Sales Value (GSV), inclusive of rebates and discounts, stood at ~179.33 billion, mainly driven by the noncigarette FMCG and hotels business, while the agri-business affected the turnover. GSV, excluding the agri-business vertical, grew by 5.7 per cent.

A shortage of leaf tobacco in Andhra Pradesh due to a lower crop output on account of drought in 2016 and adverse crop quality; relative strength of the rupee vis-à-vis currencies of competing countries; and limited trading opportunities in other agri-commodities weighed on the performance of ITC’s agri-business vertical. Besides, growth in this vertical was also affected by a high base in imported wheat trading, limited trading opportunities in agricommodities such as wheat, soya and coffee, and lower leaf exports during the quarter.

Facing a stringent regulatory environment, revenue from the cigarettes business fell by 44.82 per cent to ~49.36 billion as from ~89.55 billion during the fourth quarter (Q4) of 2016-17. ITC was, however, able to increase gross profitability from this segment by 7.58 per cent at ~35.06 billion. Its brand portfolio, including introduction of theWave brand, consumer insights and introduction of key innovative cigarette variants like Classic Double Burst, Gold Flake Mint Switch and others helped the firm face up to pressure on the legal cigarette trade.

According to Abneesh Roy, research analyst with Edelweiss, the top line reported by ITC is inclusive of taxes and thus under the GST regime, when accounting standards have changed, the top line is not comparable. Analysts estimate that ITC faced a 5 per cent volume decline in its cigarette sales during the quarter under review while for 2016-17, the decline in sales volume is 2-3 per cent.

ITC’s non-cigarette FMCG business, which is facing gestation costs owing to new product and category launches and the ongoing restructuring of the retail trade, posted a 5.75 per cent rise in its topline to ~30.52 billion during the quarter from ~28.86 billion in the same quarter a year ago, even as profits surged by 62.50 per cent to ~910 million. In the branded packaged foods business, Bingo, Aashirvaad atta and Dark Fantasy Choco Fills were the primary growth drivers while in the personal care business, the growth was led by Engage deodorants, Vivel and Fiama soaps and shower gels and Savlon handwash. The Classmate notebook range further consolidated its market leadership. However, the performance of the Lifestyle Retailing Business remained sluggish on account of an early and prolonged ‘end-of-season sale’ in the wake of disruption to trade during the transition to the GST and ongoing structural interventions to enhance operating efficiencies.