ITC net profit up 12% in fourth quarter

FIRM SAYS IT BEAT SLUGGISH DEMAND TO REGISTER A 6.6% GROWTH IN GROSS REVENUE AND A 9.4% GROWTH IN NET PROFIT FOR THE FULL YEAR, WHICH JUMPED TO ₹57,434.37 CRORE

A near ₹500 crore savings in excise duty helped cigarettes and consumer goods maker ITC Ltd report a 12.1% jump in its March quarter net profit on a 6.1% growth in gross revenue as the company witnessed a “modest recovery” in consumption after “severe disruption” in the December quarter due to demonetisation.

On Friday, ITC said its net profit in the March quarter had jumped to ₹2,669.47 crore, or ₹2.19 a share, from ₹2,380.68 crore a year ago.

ITC’s gross revenue for the quarter went up to ₹15,410.92 crore from ₹14,510.01 crore a year ago, despite “persistent weakness in wholesale channel and rural markets”, the company said in a statement. After the results were announced, ITC’s shares raced up to a new 52-week high of ₹313.40 each but closed at ₹308.65 each on BSE, up 3% from Thursday

Excise duty payout for the March quarter was at ₹3,883.28 crore compared with ₹4,382.08 crore a year ago, a decline of 11.3%.

ITC’s earnings were in line with analyst expectations. Broking firms such as HDFC Securities Ltd, Credit Suisse India Pvt. Ltd, Kotak Securities Ltd, Edelweiss Securities Ltd and Motilal Oswal Securities Ltd had in separate research reports said ITC was expected to report a net profit of ₹2,578-2,816 crore for the March quarter.

ICICI Securities Ltd said in a report on Thursday that ITC’s operating profit margin for the March quarter remained flat, and that it was around 125 basis points lower than its estimates (One basis point is one-hundredth of a percentage point).

The decline in excise duty payout possibly indicates that a substantial section of smokers had switched to 64mm cigarettes, which attract lower excise duty, ICICI Securities said.

ITC said it beat sluggish demand to register a 6.6% growth in gross revenue and a 9.4% growth in net profit for the full year. ITC’s net profit for fiscal 2017 jumped to ₹57,434.37 crore from ₹53,713.83 crore a year ago. The company’s net profit for the full year was at ₹10,200.9 crore, or ₹8.38 per share, compared with ₹9,328.37 crore last year.

Revenue from cigarettes in the March quarter at ₹8,954.94 crore was up 4.8% year-on-year (y-o-y), but pre-tax profit from the segment at ₹3,258.76 crore jumped 7.95% as operating profit margin expanded by 107 basis points to 36.39%. The company’s cigarette business was adversely impacted by “steep increase in taxation, intense regulatory pressures and tight liquidity conditions in the wholesale channel”, ITC said in a statement.

Revenue from other con- sumer goods at ₹2,885.76 crore was up 6.4% y-o-y and but pre-tax profit from the segment plummeted 29.3% from the previous year to ₹55.56 crore. ITC said a “sharp” increase in input costs, gestation cost of new launches— such as juices, dairy products and coffee—and “heavy discounting” in branded apparel impacted earnings from the segment.

March quarter revenue from ITC’s hotels division jumped 56.9% y-o-y to ₹66.93 crore, even as revenue grew only 6.4% to ₹386.52 crore.

ITC said it witnessed signs of turnaround in the second half of the year, but the recovery was hobbled by “collateral impact on the economy on account currency crunch”, the company said.

Full-year revenue from the hotels business grew 4.3% to ₹1,341.73 crore thanks to improvement in average room rate and higher sales of food and beverages. Pre-tax profit for the full year at ₹110.95 crore was almost twice as much as the company earned from the segment last year.