ITC Q3 net marginally up at Rs2,652.8-cr despite slowing business

Diversified group ITC Ltd on Friday reported a stand-alone net profit of Rs2,652.8 crore for the fiscal third quarter ended 31 December 2015, despite a depressing environment for its cigarette business and a slowing FMCG segment.

ITC had posted a net profit of Rs2,635 crore during the same period of 2014-15.

The Kolkata-based company said its net sales for the October-December 2015-16 quarter were up 3.43 per cent at Rs9,102.7 crore against Rs8,800.2 crore in October-December of the previous fiscal, also due to a lack of trading opportunities in agri-commodities.

Total revenue from the FMCG business, including cigarettes, increased 6.21 per cent to Rs6,857.5 crore, from Rs6,456.1 crore in the corresponding quarter of 2014-15.

"The company's performance during the quarter remained subdued, reflecting severe pressure on legal cigarette industry volumes, lack of trading opportunities in agri-commodities and sluggish demand environment prevailing in the FMCG industry," ITC said in a statement.

During the quarter, revenue from cigarettes increased 5.74 per cent to Rs4,379.9 crore, from Rs4,141.9 crore in the year-ago period.

"The performance of the cigarettes business remained muted during the quarter due to taxation and regulatory headwinds facing the legal cigarette industry in India," the company said.

Revenue from the other FMCG segment was up 7.06 per cent at Rs2,477.7 crore during October-December as against Rs2,314.1 crore last fiscal.

"Weak demand - particularly in rural markets - coupled with a price deflationary environment and supply chain disruption caused by heavy rainfall and floods in Chennai impacted revenue growth," said ITC.

ITC's other FMCG segment includes branded packaged foods business such as staples, snacks and meals, dairy and beverages and confectionery; apparel, education and stationary products, personal care products, safety matches and aggarbattis.

Revenue from hotel business grew 4.54 per cent to Rs345.3 crore, compared with Rs330.3 crore in the comparable period last year.

"Despite a challenging operating environment, the segment revenue recorded a growth of 4.5 per cent driven by improvement in room occupancy and good growth in the food and beverage segment," the company said.

During the quarter, ITC's hotels in Chennai had to contend with business disruption due to heavy rainfall and floods in the city.

ITC's revenue from agri business segment fell 7.31 per cent to Rs1,481 crore, from Rs1,597.9 crore in the same period last year.

"Segment revenue and profits for the quarter were impacted by lack of export opportunities in wheat, soya and coffee, besides subdued demand for Indian leaf tobacco exports," said ITC.

Besides this, a steep currency depreciation in competing geographies also weighed on the prospects of agri-commodity exports from India, it added.

Revenue from paperboards, paper and packaging business was up 5.11 per cent at Rs1,260 crore, compared with Rs1,198.8 crore in the same period last year.

"The muted demand environment prevailing in the FMCG and cigarette industry weighed on the performance of the paperboards, paper and packaging segment," it said.

"Reduction of import duties under various free trade agreements, especially with ASEAN (which became effective January 1, 2014), coupled with cheap imports from China continued to adversely impact the domestic paper and paperboard industry".

In a separate filing, ITC said its chief financial officer Rajiv Tandon has been appointed as director on the board. "He is responsible for finance, accounting, internal audit and investment subsidiaries of the company," said ITC.