Smoking Gun: Fat cigarette margin, other income lift ITC Q4

Cigarettes to FMCG and hotels major ITC 's fourth quarter net profit rose a better-than-expected 26% year-on-year to Rs 1,614 crore. While overall the company continues to be driven by cigarettes, quarterly earnings were also boosted by higher other income and lower losses in the other FMCG business.

The company's total income was Rs 6,955 crore, up 17% in Jan-March.

Analysts on average had expected ITC to report a net profit of Rs 1,550 crore on revenue of Rs 6,670 crore in the fourth quarter.

Its fourth-quarter profit from operations before other income and finance costs was Rs 2,075 crore, up 19% from a year ago.

The Kolkata-based company's net cigarette sales were up 17% to Rs 3,250 crore, while other FMCG net sales rose 23% to Rs 1,617 crore.

Most of the cigarette revenue growth would have been pricing led, with volume growth of 4-5%, analysts say.

Cigarette business margin improved 233 bps to 31%, according to Sharekhan analyst Kaustubh Pawaskar.

ITC's total FMCG sales rose 19% to Rs 4,866 crore in Jan-March. Agri-business sales jumped 31% to Rs 1,414 crore, helped by better realisations and higher volumes.

Sales in the paperboards, paper and packaging segment increased 7% to Rs 980 crore.

ITC's losses in the non-cigarette FMCG business also reduced to Rs 16 crore from Rs 68 crore a year ago.

HOTEL BUSINESS PRESSURES 

While most of ITC's businesses' saw good growth in the fourth quarter, hotels division was a drag with net sales falling 5% to Rs 286 crore. Profit was down 17% to Rs 83 crore.

"Hotels business continues to be impacted by the weak economic environment in global source markets and slowdown of the domestic economy," the company said.

ITC said the US market appears to be on the recovery path and holds promise for the future, but Europe is yet to come out of its debt problems and recession.

The company has launched a new brand 'My Fortune' to cater to the upscale business traveller and the first such hotel opened in Chennai last year. ITC said it will expand the brand further going ahead.

Overall in the hotels business, it will continue with its investment-led growth strategy as long term outlook for Indian hotel industry remains positive, it said.

Construction of the super-luxury ITC Grand Chola in Chennai is now complete and will open in the early part of the current financial year. Construction at other luxury properties in Kolkata and Gurgaon is also progressing well and it aims to rapidly scale up the business with several new projects, including joint ventures and management contracts on the anvil.

ITC shares ended down 0.6% at Rs 231.85 on NSE on Friday. The street may have been disappointed as profit growth excluding the higher other income was below expectations, the Sharekhan analyst said.

Source: www.moneycontrol.com

Thanks,

Gaurav Agarwal

Head Dealer

DENIP Consultants Pvt Ltd