ITC Posts Highest Profit Growth In 5 Years
ITC’s profit grew 26 percent, the most since the fourth quarter of 2012.
Weakness In Volumes
- Net profit jumps 25% year-on-year, the most in five years.
- Cigarette revenue rises nearly 5 percent while hotel business grows 6 percent.
- FMCG revenue rises 8 percent but margins contract 100 basis points.
- Weakness in bulk trade and rural market continues to hurt volumes, company says.
- Company announces dividend of Rs 4.75 on each share
ITC Ltd.’s net profit growth met estimates for the quarter ended March even as the cigarette-to-consumer-goods maker said weakness in bulk trade and rural market continues to hurt volumes.
Net profit jumped 25.3 percent – the most in five years – to Rs 2,670 crore compared to the corresponding quarter last year. Revenue grew 8 percent for the fast moving consumer goods (FMCG) business, which includes brands such as B-Natural, Bingo and Yipee noodles. The hotel business grew more than 6 percent and revenue from cigarettes rose nearly 5 percent year-on-year.
Ambit Capital, Motilal Oswal and Edelweiss had estimated the revenue from cigarette sales to remain subdued on the back of higher prices and lower volumes. ITC has not revealed its cigarette volumes yet.
Persistent weakness in the wholesale channel and rural markets and the liquidity squeeze following the government’s demonetisation drive continues to impact volumes, the company said in a media statement.
Higher margins in packaged food, agricultural business and personal care products were offset by additional spending in the education and stationery business and big discounts in the apparel business.ITC Media Statement
Margins on earnings before interest and tax (EBIT) for the cigarette business expanded marginally to 36.4 percent from 35.3 percent a year ago and contracted by 100 basis points for the overall FMCG business. The hotels and stationary businesses saw margins jump by 560 basis points and 210 basis points, respectively.
Overall, the revenue rose 6.2 percent to Rs 15,009 crore during the quarter, according to the company’s exchange filing. Earnings before interest, tax, depreciation and amortisation rose 7.5 percent to Rs 3,876 crore.
The company announced a dividend of Rs 4.75 on each share. Its stock closed nearly 3 percent higher on Friday compared to a 0.9 percent rise in the benchmark S&P BSE Sensex Index.