ITC on Thursday reported a 20% year-on-year rise in net profit for the first quarter of fiscal 2013 at R1,602 crore, in line with the Street?s expectations. Revenues, in the three months to June, were up 15% year-on-year at R6,652 crore.
The firm posted a strong 15% y-o-y growth in the cigarettes business, boosted by price hikes, and also reported lower losses in the non-cigarette FMCG businesses. Revenues from the cigarettes business rose to R3,304 crore from R2,873 crore in the same period last fiscal while profits were up 20% y-o-y at R1,900 crore. Losses from the non-cigarette FMCG businesses fell to R38.84 crore from R77 crore in the corresponding period in FY12. Non-cigarette FMCG sales rose 23% y-o-y to R1,473 crore. On a day when the Sensex closed 1.41% lower, the ITC stock closed at R252.75 on the BSE, down 0.73%.
A report from Morgan Stanley noted that the growth in cigarette volumes of 1% had been better than its expectation of flat volumes and the consensus expectation of a 2% decline. ?In addition, cigarette Ebit growth of 20.5%, versus our expectation of 17%, was driven by a combination of price increase, product mix improvement and benign commodity cost environment,? Morgan Stanley analysts said.
ITC also effected a 14-15% price hike, which offset the 17-18% increase in excise for the current fiscal. Operating margins for the cigarette business increased by 140 basis point to 31.3% in the quarter, and as Morgan Stanley points out, this is the fifth consecutive quarter of more than 19% Ebit growth in the cigarette business.
For ITC, the hotels business continued to be an area of concern. While net sales were up marginally (0.9%) to R232 crore, profit fell 50% to R26 crore during the quarter from R52 crore in the same period last fiscal. ?The hospitality industry continues to be impacted by the weak global and domestic economic environment and significant additions to room supply in key Indian cities,? said ITC.
Through a newly formed subsidiary, ITC has acquired a prime plot in Colombo, on a 99-year lease from the government of Sri Lanka, for developing a five-star luxury property.
Analysts were concerned about the fall in the net sales of the agri business net sales of 1% y-o-y to R1,691 crore in the quarter though profits rose 9% to R171 crore. ?Segment revenues were impacted during the quarter given the surplus leaf tobacco inventory and the prevailing adverse commodity price parities,? said an ITC release.
