ITC Q1 net profit rises 12.7% to Rs 3,436.51 crore, revenue up 6.35%

Meeting street expectations, cigarettes to hotels major ITC Ltd posted a 12.70 per cent increase in its net profit at Rs 3,436.51 crore during the quarter ended June 30, 2019 even as its revenue from operations grew by 6.353 per cent at Rs 12,657.90 crore amidst sluggish demand conditions. 

The same during the corresponding quarter of the 2018-19 fiscal year stood at Rs 3,049.38 crore and Rs 11,881.87 crore, respectively. The street was expecting a 10-14 per cent rise in the company’s profits.

The performance comes at a time when demand, from both, the urban as well as rural economies, has been sluggish.

Its revenue from cigarettes, led by price hike posted a 6.84 per cent increase at Rs 6,141.92 crore making up for around 50 per cent of the company’s revenue from operations. According to ITC, its focus on nurturing a world-class product portfolio, consumer insights and a strategy of continuous innovation and value creation helped deliver superior competitive performance in the cigarettes space. 

Deep consumer insights and a robust innovation pipeline enabled the business to introduce new variants like Classic Rich & Smooth, Classic Verve Low Smell and Gold Flake NEO which, the company said, have received positive response. Similarly, recently introduced brands and variants such as American Club, Player’s Gold Leaf and Wave continued to strengthen their market standing.

In a statement, the company said that revenues from its non-cigarette FMCG segment, excluding the lifestyle retaining business, grew by around eight per cent led by atta, potato chips, cream biscuits and noodles in the branded packaged foods business; handwash and bodywash in the personal care products vertical and notebooks in the education & stationery products business. Segment EBITDA at Rs 181 crores recorded a growth of 41 per cent despite stepped up investments in brand building, gestation and start-up costs of new categories and new facilities.

Its hotels business registered around 15 per cent growth in its revenue driven by the recently commissioned hotels - ITC Kohenur in Hyderabad and ITC Grand Goa Resort & Spa at Goa. However, the performance of existing hotels was relatively subdued due to slowdown in the conferences and banqueting segment in the first quarter of the current fiscal year which resulted in profitability in this segment dipping by 33.96 per cent at Rs 9.82 crore.

According to the company, while EBITDA from hotels posted an 18 per cent growth, additional depreciation charge pertaining to new properties weighed on the overall segment results. The business made steady progress during the quarter in the construction of an ITC Hotel in Ahmedabad and WelcomHotels in Amritsar, Guntur and Bhubaneswar.

Lack of trading opportunities in oilseeds and pulses, subdued demand for leaf tobacco in international markets, relatively steeper depreciation in currencies of competing origins in recent years and adverse business mix resulted in the company’s agri wing posting a 4.31 per cent rise in its profitability at Rs 201.78 crore.

The company said that while it will continue to strengthen its value-added products portfolio like launch of maida suited for bakery and pizza products, the recent foray into the frozen snacks segment under the ITC Master Chef brand, continues to be scaled up.

The deep rural linkages and agri-commodity sourcing expertise of the agri business, including value-addition through identity preservation, traceability and certification are a critical source of competitive advantage for the company. 

During the quarter, the agri vertical established milk sourcing network in West Bengal to support the growing franchise of the Aashirvaad Svasti range of dairy products.

ITC said that its paperboards business continued to record robust growth driven by strong volume growth in the value added paperboard segment and product mix enrichment. However, growth in the packaging and printing business was impacted due to sluggish demand conditions in the FMCG industry and exports. This segment reported a rise 11.53 per cent rise in its pre-tax profit at Rs 329.76 crore.

 

	Q1 FY 2019-20	Q1 FY 2018-19	Growth (in percentage)
Revenue from operations	12657.90	11881.87	6.53
Net Profit	3436.51	3049.38	12.70
Total Expenses	8113.67	7667.62	5.82
Source – ITC Ltd All figures in Rs. crore