ITC net profit up 19.4%, aided by non-cigarette and agri-business segments

Moneylife Digital Team 17 May 2013

Despite an increase in its tobacco/cigarette division, the company is sceptical of the government’s decision to tax tobacco products. Other segments, however, have done well and are poised for growth

ITC, a leading conglomerate and fast moving consumer good company, posted a net turnover at Rs8180.30 crore for the quarter ended March 2013 registering a growth of 19.2%, primarily driven by a 26.4% growth in the non-cigarette FMCG segment, 26.4% growth in agri-business segment and 13.4% growth in the cigarettes/tobacco segment. Post-tax profit for the same period stood at Rs1927.98 crore, which grew at an impressive rate of 19.4% over the corresponding period last year.

Other segments in ITC have done well, especially the consumer segments. Agri-business profits grew 13.7% driven by better realisations and higher volumes. Paperboards, paper & packaging segment revenues were up 9.1% aided by higher volumes and product mix enrichment. Profitability was impacted by a steep increase in wood, coal and chemical costs. Non-cigarette FMCG segment registered robust revenue growth of 26.4% and continues to demonstrate improving profitability. Non-cigarette FMCG segment recorded maiden profit during Q4 2012-13.

ITC Grand Chola, the company's 600-key super premium integrated luxury hotel in Chennai was inaugurated on 15 September 2012. The hotel has been accredited as the World’s largest LEED Platinum rated hotel, in the new construction category. However, the hospitality industry continues to be impacted by the weak economic environment and significant additions to room inventory.

Even though its cigarettes division grew healthily, the company maintained a critical stance on the government’s decision to tax the sector. According to ITC, “discriminatory and punitive taxation coupled with a growing incidence of smuggling and illegal manufacture are the biggest challenges confronted by the domestic cigarette industry.” Further, it said, “The policy of high taxation narrowly focused on cigarettes has also led to the rapid growth of the illegal cigarettes segment. This segment has grown exponentially from 11 billion sticks in 2004 to 22 billion sticks in 2012, of which, 2 billion sticks have been added in the last one year alone. The illegal segment now accounts for 18% of cigarette trade and India is now the fifth largest market in the world for illegal cigarettes comprising smuggled foreign as well as domestic duty-evaded cigarettes.”

In the cake and confectionery foods business, the biscuits and confectionery categories gained significant scale and market standing during the year. ‘Sunfeast’ biscuits sustained its robust growth trajectory, especially at the value-added and premium end.

In the snack foods business, the company continued to enhance market standing and expand scale in the fast growing savoury snacks, noodles and pasta categories.

In the staples, spices and ready to eat foods business, ‘Aashirvaad’ atta consolidated its leadership position aided by the strong performance of Aashirvaad ‘Multi-grain’ atta. The premium ‘Multi-grain’ and ‘Select’ variants continued to grow rapidly with an increasing proportion of consumers shifting to these value-added offerings.

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