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Agri business, hotels boost ITC profit

ITC Ltd. closed the second quarter with a 11.9% rise in its net profit to ₹2,954.7 crore on a revenue of ₹11,272.5 crore. Cigarette revenues and profits too were higher during the quarter, said a regulatory filing.

Revenues were driven mainly by FMCG – others, agri-business and hotels business, the company said in a statement. ITC shares fell by 2.3% on the BSE and 2.7% on the NSE.

FMCG boost

ITC said that its FMCG-others segment revenues rose 12.7% with most categories improving their market-standing. Profitability improvements were driven by enhanced scale, product-mix enrichment and cost management initiatives, despite costs on brand building, new projects gestation and increased input costs. It included branded packaged foods and personal care products. The company is entering new segments. ITC also commissioned an integrated consumer goods manufacturing unit at Tiruchirapalli in Tamil Nadu during the quarter. Hotels segment profitability also improved on the back of higher room rates, strong F&B sales and high operating leverage. The 252-room erstwhile Park Hyatt Goa Resort is now in the possession of ITC.

Paperboards, paper and packaging segment also saw an increase in profit driven by product mix enrichment, higher realisation, strategic investments in imported pulp substitution, process innovation leading to improved pulp yield and benefits of cost-competitive fibre chain.

ITC, however, admitted that the limited pressure on legal cigarette industry volumes, adverse quality and leaf cost escalation pertaining to Andhra 2017 crop and lower export incentives weighed on cigarette segment results.

An Edelman Securities Ltd report said that the 5 % rise in cigarette volumes beat their expectations although margins were impacted by Kerala floods and one off cost related to the graphic health warnings. Overall sales and profits rise were in line with estimates, the report said.

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