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Cigarettes-to-hotel conglomerate ITC has reported a 21 per cent increase in net profit in the third quarter. The better-than-expected result is because of higher volumes and price increase in cigarettes, combined with a better performance of the non-cigarette FMCG (fast moving consumer goods) business.
ITC’s profit from operations grew by 20.1 per cent to Rs 2,653 crore while profit before tax and net profit at Rs 2,957 crore and Rs 2,052 crore registered a growth of 19.4 per cent and 20.6 per cent, respectively.
The Kolkata-based company’s gross revenues/income from operations grew 22.9 per cent to Rs 10,825 crore, thanks to growth in branded packaged foods, personal care, cigarette and agri business.
Net revenues grew 23 per cent to Rs 7,627 crore, while revenues from cigarettes grew 13 per cent to Rs 3,657 crore and non-cigarette FMCG segment by 30 per cent to Rs 1,783 crore. Cigarette sales’ share in profit before tax was 75 per cent at Rs 2,234 crore.
During the quarter, new variants/product enhancements across its brand portfolio were introduced.
“The launches in the new filter segment (cigarette length not exceeding 65 mm) have met with favourable consumer response and the business is rolling out the products to all markets in the country,” the company said in a statement.
During the current quarter, there was a volume growth of two-three per cent in cigarettes, said V Srinivasan, analyst, Angel Broking research. “The sub-65mm segment also helped volumes. Prices of Gold Flake were hiked by six-seven per cent, but it seems the market is getting attuned to the price hikes,” he added.
Analysts had estimated stagnant volumes for cigarettes in FY13 on the back of the price increases taken.
Srinivasan, however, pointed out the operating profit margin was 36.4 per cent, down 75 bps year-on-year. “While the cigarette business posted margin expansion, losses of other FMCG halved to Rs 24 crore. However, other divisions posted a margin contraction on a y-o-y basis,” he said.
The company statement said that the hospitality sector continued to be “adversely impacted by the weak economic conditions prevailing in key international source markets and India on the one hand and significant additions to room supplies in key Indian cities on the other”.
Profits in the segment stood at Rs 55.5 crore during the quarter, compared to Rs 101.7 crore in the same period last year, although revenues grew by 11 per cent to Rs 309 crore.
ITC’s agri-business profits were at Rs 173 crore, compared to Rs 142 crore a year ago, while revenues recorded a 43 per cent growth to Rs 1,631 crore. The agri-business revenues were aided by exports of wheat, leaf tobacco and soya, ITC said.
“The business continues providing strategic sourcing support to the company’s cigarettes and branded packaged foods businesses by ensuring high quality supplies at competitive costs,” the company noted.
ITC’s stock closed marginally higher at Rs 287.05 on the Bombay Stock Exchange on Friday.