ITC Q3 pre-tax profit rises 4.5% to Rs 5049 cr on hotels, agro businesses

The company said that the macro-economic environment continues to be adversely impacted as reflected in GDP growth, and persistent weakness in consumption demand and investments

In line with street estimates, cigarettes to hotels major, ITC Ltd posted a near six per cent rise in its net income at Rs 13308 crore led by its non-cigarette FMCG, hotels and agro businesses; with a pre-tax profit increase of around 4.5 per cent at Rs 5049 crore during the quarter ended December 31, 2019.

The same in the third quarter of the last fiscal year stood at Rs 12584 crore and Rs 4828 crore respectively.

The net profit beat street estimates to grow by around 29 per cent at Rs 4050 crore as compared to Rs 3141 crore registered in the third quarter of the 2018-19 fiscal year. During the quarter under review, ITC received a tax credit of Rs 340 crore as the company opted for tax sops as per the Taxation Laws (Amendment) Ordinance, 2019.

The company said that the macro-economic environment continues to be adversely impacted as reflected in GDP growth, and persistent weakness in consumption demand and investments.

“The delayed arrival of the Kharif crop due to spatial variations in rainfall especially close to the harvest season, commodity price inflation together with disruptions in certain parts of the country exacerbated the already challenging operating environment during the quarter,” the company said.

However, ITC is hopeful that expectations of a good Rabi crop, backed by the government’s measures including reduction in corporate tax rates, initiatives to boost infrastructure and promote exports, augur well for the revival of the economy.

Despite persistent weakness, especially in rural markets, backed by market liquidity conditions and illicit trade in the cigarettes channels, ITC posted a five per cent increase in its revenue from this vertical at Rs 5311 crore with a six per cent increase in profitability at Rs 3756 crore.

New launches like Gold Flake Indie Mint, Gold Flake Neo and Classic Rich & Smooth in the premium end and focused offers under brands like American Club, Wave, Flake and others, helped boost sales.

In the non-cigarette fast moving consumer goods (FMCG) business, ITC posted a six per cent growth in its income at Rs 3312 crore with an EBITDA growth of 48 per cent to Rs 256 crore. Categories with relatively higher rural salience were the most impacted. ITC said that it continued to mitigate the impact of the slowdown through several proactive measures like enhancing direct reach, introducing targeted relevant offers, investing in fast growing channels and extending lines of credit to a few select trade partners.

With an “all-round improvement” in its hotels business across new and existing properties, ITC’s segment revenue grew by 22 per cent at Rs 552 crore. Higher room rates and operating leverage aided margin expansion.

ITC commissioned the 101-room luxury property, Welcomhotel Amritsar, during the Q3 period while new properties like ITC Kohenur, ITC Grand Goa and ITC Royal Bengal continued to receive excellent response.

On the agro business front, segment revenue grew by around nine per cent at Rs 2095 crore as the company leveraged trading opportunities, especially in oilseeds, pulses and coffee and scaled up its portfolio of value-added products.

Owing to the subdued demand in the FMCG and the liquor industry, the performance of the paperboards, paper and packaging business remained flat at Rs 1555 crore.