Despite a challenging economic climate, the conglomerate saw its sales growing at an impressive 15% while its net profit grew at 20.2%. This was helped by its tobacco and packaging segments
ITC, a conglomerate and fast moving consumer goods major, posted a strong performance during the June 2012 quarter, with 15%, year-on-year, increase net revenue growth to end the quarter with sales of Rs6,713 crore. Its sales were driven primarily by branded packaged foods, education and stationery and its tobacco businesses. Non-cigarette fast moving consumer goods segment registered robust revenue growth of 23%, while its hotels business continues to be impacted by weak global and domestic economic environment. Its net profit grew at a higher rate, 20.2%, to end the quarter at Rs1,602 crore when compared to the corresponding quarter last year.
Its operating profit grew by 21%, which is more than the preceding three quarter year-on-year growth rate (which stood at 19%). Its operating profit has been very steady and stable despite global economic uncertainties and difficulties. Despite increase in commodity prices, its foods business grew. The company said in its press release that the sales of value‐added and premium products grew at a faster pace based on an enriched portfolio mix. It was especially helped by its paperboards business which recorded a growth of 9% while segment results grew faster at 17%. Improvement in profitability was further aided by smart commodity sourcing and several strategic cost management initiatives, which was largely helped by its agri-business that gave ampld support, in terms of sourcing and back-end supplies. Given such robust performance, it is little wonder that ITC is commanding high premium (its market capitalisation is quoting at over 20 times its operating profits) while its return on equity is 34%.
The hotel segment was affected as it was impacted by the weak global and domestic economic environment and significant additions to room supply in key Indian cities. Consequently, segment revenue has remained at the same level as the corresponding quarter of the previous year. In line with its investment led growth strategy, given the compelling longer-term potential of this sector, the company, through a newly formed subsidiary, acquired a prime plot of land in Colombo, Sri Lanka on a 99‐year lease from the Government of Sri Lanka, for developing a five star luxury property. The new super luxury property, ITC Grand Chola at Chennai, is complete and is awaiting statutory clearances prior to its commercial launch. The construction activity of the new luxury properties at Kolkata and at Classic Golf Resort near Gurgaon are progressing satisfactorily.
The cigarette industry in India continues to be impacted by a discriminatory taxation and regulatory policy framework, with steep increases in excise duty and VAT. Despite this challenging environment, ITC managed to sustain leadership position in the country. Several initiatives were launched during the quarter across the portfolio in terms of pack modernization and introduction of variants and limited edition packs under the ‘Classic’, ‘Flake’, ‘Gold Flake Premium Filter’ brands further bolstering market standing, said the press release.
According to its press release, its branded foods segment grew strong, with an increasing number of consumers shifting to value‐added and premium offerings of Aashirvaad atta under the ‘Multi‐grain’ and ‘Select’ brands, the Staples category continued to improve its realisations and margins. During the quarter, ‘Kaju Badam Cookies’ was launched in select markets and initial consumer response has been encouraging. The Bingo! range of potato chips and finger snacks grew at a rapid pace. Recent launches in this category include 'Tangles' in an innovative format and ‘Mad Angles Masti Chaat’ were well received by target consumers and are being extended to more markets.
The scrip closed down 2.02% at Rs249.45 on the Bombay Stock Exchange.