FMCG major ITC Ltd on Thursday reported a 7.4 per cent increase in its net profit at Rs 2,560.50 crore for the quarter ended June 30, 2017 as compared to Rs 2,384.67 crore in the corresponding quarter last year.
Its revenue from operations during the quarter under review increased by 4.1 percent to Rs 13,800.42 crore as compared to Rs 13,253.06 in the year-ago period.
The company’s revenue from cigarettes grew by 6.6 percent to Rs 8,774.16 crore in the June quarter from Rs 8,230.60 crore in the same period last year.
The company said the legal cigarette industry remained under pressure due to further increase in excise duty in February. Revised rates of compensation cess announced by GST Council with effect from July 18, with the intent to correct anomaly in rates notified earlier has “resulted in sharp escalation of tax incidence on cigarettes” which is “not in line with the fundamental principle of maintaining revenue neutrality under the GST regime”.
“…coupled with the increase in excise duty, the revised rates under the GST regime will increase the tax burden of the cigarette business by over 20 per cent,” it said in statement.
In the other FMCG segments, the revenue in the quarter under review stood at Rs 2,600.89 crore as against Rs 2,385.15 crore in the same period last year.
“Segment revenue grew by 9 per cent during the quarter amidst a muted demand environment which was further impacted by destocking in trade channels ahead of the transition to GST from July 1,” the company said.
Revenue growth in the segment (FMCGs other than cigarettes) was driven primarily by the branded packaged foods businesses, personal care and stationery products, partially offset by the ongoing restructuring of retail footprint and trade presence by the lifestyle retailing business which also saw an early ‘end of season sale’ and heavy discounting triggered by GST transition.
Hotels segment revenue was up 6.1 per cent to Rs 304.89 crore in the quarter as compared to Rs 287.36 crore in the year ago period, aided by improvement in average room rate and healthy growth in food and beverage sales.
However, improvement in profitability was limited due to loss of revenue at certain properties particularly ITC Grand Chola, Chennai on account of the ban on sale of liquor at outlets in close proximity to highways and gestation costs of the recently commissioned ITC Grand Bharat, Gurgaon, the company said.
The performance of the paperboards, paper and packaging segment remained impacted during the quarter primarily due to “sluggish demand conditions prevailing in the FMCG and legal Cigarette industry and unabsorbed capacity in the paperboard market”, it said.
In addition, off-take of paperboards and carton packaging was impacted due to destocking of FMCG and pharma products in trade channels ahead of the transition to GST and the ban on sale of liquor from outlets located in close proximity to highways.
Profitability in the segment, however, improved on the back of benign input prices and richer product mix, said the city-headquartered company.
The performance of the agri business during the quarter was impacted by lower crop output and adverse quality of the Andhra leaf tobacco crop due to drought in 2016 and limited trading opportunities in other agri-commodities, it added.