ITC Q2 net up 6% at Rs 2,640 cr despite higher tax on cigarettes
27 October 2017
Consumer products major ITC Ltd has posted net profit of Rs 2,639.84 crore for fiscal second quarter ended 30 September 2017, a 5.6 per cent year-on-year increase from the Rs2,500.03 crore net profit posted in the corresponding quarter of the 2016-17 fiscal.
The company's total income, during the second quarter of the current fiscal stood at Rs 10,258.13 crore, compared to the total earning Rs14,091.96 crore in the year-ago period.
However, analysts say ITC, which used to report its total revenue, which included taxes from cigarettes, only reported net sales this quarter
"The gross revenue from sale of products and services and excise duty for the quarter and six months ended 30th September, 2017 are not comparable with the previous periods," ITC stated in a release.
ITC attributed the change in reporting to the introduction of GST midway, which made it difficult for reporting. Under Indian Accounting Standard - 18 on Revenue and Schedule III of the Companies Act, 2013, GST, GST Compensation Cess, VAT, and others are not included in gross revenue from sale of products and services for applicable periods, it pointed out.
A note submitted by ITC while declaring its quarterly performance stated that the company's gross sales value, which includes net of rebates and discounts, stood at Rs16,391.58 crore against Rs15,769.89 crore reported in the second quarter (Q2) of the 2016-17 fiscal year which represents a growth of 3.9 per cent.
"Pressure on the legal cigarette industry escalated significantly during the quarter on account of the steep increase in tax incidence under the GST regime and additional burden on the business due to GST transition costs", ITC said.
Its revenue from the cigarette business, which accounts for 47 per cent of the topline, stood at Rs4,554.21 crore. ITC reported earnings of Rs8,528.47 crore from this business in the Q2 period of 2016-17. Profits from this business soared by 2.3 per cent to Rs3,291.67 crore against Rs3,216.88 crore reported in the year-ago period despite projected decline in volume.
The non-cigarette FMCG vertical, which comprises of confections, dairy and beverages and personal care products, entered the green zone posting a 20.49 net profit as against the loss of Rs3.26 crore in the Q2 period of the 2016-17 fiscal year.
Profits and revenue from its hotel business rose by 552.30 per cent and 0.96 per cent at Rs 4.24 crore and Rs 300.18 crore respectively while the profit from agri business dipped by 13.73 per cent at Rs 256.20 crore. The paperboards, paper and packaging business posted a growth of 18.21 per cent in its profit at Rs 274.19 crore.
Benefiting from the GST regime, its total expenses went down by 38.50 per cent to Rs6,313.84 crore against the expenditure of Rs 10,265.74 crore on a year-on-year basis.