ITC misses Street expectations
Stung by a punitive tax on cigarettes and a slowdown in the FMCG category, the net profit of cigarettes-to-hotel major ITC rose 3.6 per cent to ~2,361.18 crore in the March quarter, against ~2,278.01 crore in the year-ago period.
Stung by a punitive tax on cigarettes, net profit of cigarettes-to-hotel major ITC rose by 3.6 per cent at ~2,361 crore in the March quarter, against ~2,278 crore in the year-ago period, missing Street expectations by a wide margin. Bloomberg had estimated the net profit to be at ~2,521 crore. Excluding expenditure on corporate social responsibilty programmes, net profit grew by 7.8 per cent.
“The muted growth in revenue and profits during the quarter reflects, inter alia, the continuing impact of the steep hike in taxation on cigarettes, sluggish demand conditions in the fast-moving consumer goods (FMCG) sector,” the company said in a statement.
Revenues in ITC’s cigarette segment grew by 3.2 per cent on a yearon-year basis to ~4,211 crore. The growth was mainly on the account of a steep price increase as cigarette volumes continued to decline. In March, ITC had effected a price increase to the tune of 15 per cent, the sharpest hike at one go. Cigarettes account for about 80 per cent of ITC's pre-tax profit. Cigarettes' segment Ebit (earnings before interest and tax) was up six per cent y-o-y to ~2,706.15 crore.
Analysts said that the cigarette category continued to show doubledigit decline in volumes after a 15 per cent decline last quarter. Excise duty on sub-65mm sticks was increased by 25 per cent and by 15 per cent for cigarettes of other lengths.
ITC said, over three years, the incidence of excise duty and value-added tax on cigarettes, at a per unit level, had gone up cumulatively by 98 per cent and 104 per cent, respectively.
Net sales grew by 0.5 per cent to ~9,188 crore during the quarter as noncigarette FMCG sales moderated due to soft consumption off-take in these categories. This again was lower than ~9,738crore estimatedbyanalysts. The non-cigarette FMCG segment's Ebit grew by 12.6 per cent to ~48.5 crore over a revenue of ~2,567 crore, which was up 11 per cent. Revenues from the agri business were affected as it fell from ~2,004 crore in the year ago quarter to ~1,428 crore. Revenue from hotels segment grew eight per cent to ~346.4 crore. But, hotels margins and profits fell.