ITC Net Rises 22.5% in Q3 but Smokers Fail to Cheer Scrip - The Economic Times
Jan 21, 2012
Tobacco, hotel and consumer goods enterprise ITC Ltd reported a 22.5% jump in its net profit for the third quarter ended December, but lower-than expected volume growth in cigarette business drove its share price down 3.6% on the Bombay Stock Exchange.
The country's largest cigarette maker reported third quarter net profit of Rs 1,700.98 crore on net sales of 6,195.43 crore, which grew 14.2% year-on-year, driven by cigarettes, branded packaged foods, personal care and agri-business. Its hotel business, however, reported 1% fall in revenue.
While ITC's mainstay cigarette business grew 16% to Rs 3,232.83 crore and reported 20% higher profit at Rs 1,844.2 crore, this was mainly driven by price increases and launch of premium brands like Player's, Classic Citric Twist and Hero. Cigarette volume grew 5% during the quarter, falling short of market expectation of 7-8%.
Market analysts such as Motilal Oswal's Amnish Aggarwal and Sharekhan's Kaustubh Pawaskar also say that ITC's profit was partly driven by a 48% jump in other income. Hence, the 3.6% drop in the ITC scrip to Rs 201.35 on a day when the BSE Sensex rose 95 points to end at 16,739.
Analysts attributed ITC's other income growth to its corporate treasury operations. "If ITC manages to achieve 40%-plus growth in other income during the next quarter, overall performance will be in similar lines. ITC's treasury operations will be something to look out for," says Sharekhan's Pawaskar.
The company's operating margins improved by 124 basis points and analysts expect its operating profit to grow 18-20% in the next quarter. ITC says its biggest growth driver was the personal care and packaged food segment where the composite revenue growth was 24%. This division - which owns brands like Sunfeast, Bingo, Candyman, Fiama Di Wills and Vivel - posted 1,370.72-crore sales and cut its losses down to Rs 46.63 crore from Rs 73.6 crore a year earlier.
ITC says the packaged food business improved profitability by improvement in product, process efficiencies and smart sourcing.
ITC, which owns the country's second-largest hotel chain, however, reported a 1% fall in revenue in its hotel business to Rs 278.72 crore, though profit increased by 15% to Rs 101.74 crore. "There has been no improvement in occupancy and average room rates remained lower. The increase in profits was due to better cost efficiencies," says Aggarwal of Motilal Oswal.
ITC says the hospitality industry was impacted by the weak economic environment in the US and Europe, which are big source markets, and the slowdown in India. The company said its upcoming super luxury hotels at Chennai, Kolkata, Gurgaon and Colombo were progressing satisfactorily. It is also negotiating for several new projects, including joint ventures and management contracts.
During the quarter, ITC launched consumer loyalty programme Club ITC, targeted at the customers of the premium retail format Wills Lifestyle and ITC Hotels.
ITC's agri-business revenues and profits grew by 10%, driven by higher trading volumes and improved realisations in leaf and wheat. The paperboards, paper and packaging businesses too registered strong growth in profits, aided by improved mix and higher volumes.
Puff Problems
ITC net profit hits Rs 1,700.98 cr on net sales of Rs 6,195.43 cr, driven by cigarettes, branded packaged foods, personal care and agri-business. Hotel business revenue fell 1% in Q3
Cigarette business grew 16% to Rs 3,232.83 cr and reported 20% higher profit, driven by price increases and launch of premium brands like Player's, Classic Citric Twist and Hero
Cigarette volume grew 5% during the quarter, falling short of market expectation of 7-8%, which dragged down the ITC share 3.6% on BSE
