ITC net up 6% in Q2 on lower expenses

Diversified conglomerate ITC Ltd has reported about 6 per cent rise in net profit, aided primarily by lower expenses.

Profit for Q2 FY-18, stood at ₹2,640 crore against ₹2,500 crore in the year-ago period. Expenses dipped by 39 per cent, Y-o-Y, to ₹6,314 crore.

The comparable gross sales value (net of rebates/discounts) stood at ₹16,392 crore, a 4 per cent Y-o-Y growth.

Gross revenues – which stood at ₹9,676 crore for the July to September period this fiscal – are not comparable with the year-ago-period following a change in the accounting structure. Revenues are now net of GST, while earlier it was gross of excise.

Cigarettes under pressure The cigarette business impacted by price hikes saw a 6 per cent volume dip Y-o-Y, analyst firm Edelweiss Securities said in a report. The segment accounts for over 80 per cent of the company’s profit before tax and witnessed a 2.33 per cent upward movement on a Y-o-Y basis to ₹3,292 crore.

For the quarter, cigarette revenues stood at ₹4,554 crore. The segment earnings are not comparable with the ₹8,528-crore it reported in Q2 FY-17 (following a change in the accounting structure).

Industry volumes continue to be under severe pressure due to the sharp increase in tax incidence under the GST regime, ITC said.

Transition to GST due to non-availability of additional duty surcharge credit on transition stocks pushed up costs, while the unanticipated revision of GST compensation cess impacted pipeline stocks, it added.

FMCG-others FMCG-Others – that include branded packaged food, apparels, education and stationery products, personal care products, safety matches and incense sticks – saw a 10 per cent jump on comparable basis, despite muted demand environment and disruption due to GST transition.

“While off-take in the retail channel normalised progressively, the wholesale channel is yet to fully recover,” the company said.

Incidentally, the segment reported a profit of ₹20 crore for Q2 FY-18 on account of good performance in the foods and personal care businesses.

Other businesses Despite revenues of the paperboards, paper and packaging segment being impacted it reported an 18 per cent jump in profit to ₹274 crore.

The agri business revenue growth too, remained subdued on account of limited trading opportunities and shortage of leaf tobacco crop due to drought in Andhra Pradesh in 2016. The segment saw profits dip by 13 per cent, Y-o-Y, to ₹256 crore. ITC claims the dip was because of a “steep increase in leaf farm prices, adverse crop quality and relative strength of the rupee vis-à-vis currencies of competing origins”. ITC stock closed at ₹269.35, up by 0.32 per cent, on the BSE, on Friday.

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