Cigarette-to-FMCG major ITC Ltd on Friday reported a 5.6 per cent increase in its net profit to Rs 2,639.84 crore in the quarter ended September 30, 2017 as compared to Rs 2,500.03 crore in the year-ago period.
Its gross revenue from sale of products and services, in the quarter under review, stood at Rs 9,676.20 crore, down by 28 per cent from Rs 13,491.37 crore in the year-ago period.
The company’s performance during the quarter was relatively subdued due to severe pressure on the legal cigarette industry and sluggish demand conditions prevailing in the FMCG industry.
Operating conditions in the agri-business and hotels segment also remained challenging, it said.
The total comprehensive income (TCI), for the quarter was at Rs 2,610.80 crore registering a growth of 5.5 per cent and on a comparable basis, gross sales value (net of rebates/discounts) stood at Rs 16,391.58 crore representing a growth of 3.9 per cent.
The company said the pressure on the legal cigarette industry escalated significantly during the quarter on account of the steep increase in tax incidence under the Goods and Services Tax (GST) regime and additional burden on the business due to the GST transition costs.
The legal cigarette industry, already reeling under the cumulative impact of steep increase in taxation over the last five years and intense regulatory pressures, was further impacted by the sharp upward revision in GST Compensation Cess announced by the GST Council at its meeting on July 17, according to the company’s statement.
“While the intention of the government was to correct an apparent anomaly in cigarette taxation under the new tax regime announced earlier on account of the removal of the cascading effect of excise duty which existed in the pre GST regime, the upward revision resulted in significantly higher tax incidence on cigarettes compared to the pre GST scenario which is not in keeping with the fundamental principle of revenue neutrality,” it said.
The company added that the combined impact of increase in excise duty announced by the Union Budget 2017 and the revision in GST compensation cess resulted in an incremental tax burden of over 20 per cent on the company.
In terms of other fast moving consumer goods (FMCG), the segment revenue registered a growth of 10 per cent on a comparable basis despite muted demand environment and disruption due to GST transition.
This growth was driven by strong performance of the branded packaged foods and personal care businesses partly offset by the impact of ongoing restructuring of retail and trade footprint in the Lifestyle retailing business.
The city-headquartered firm reported that in the hotels business, room revenue grew at a healthy pace during the quarter. However, food and beverage revenue growth was impacted by a “highway liquor ban” which prevailed for a significant part of the quarter.
“The performance of the agri-business segment during the quarter was impacted by shortage of tobacco crop in Andhra Pradesh due to drought in 2016 and adverse crop quality, relative strength of the Indian Rupee vis-a-vis currencies of competing origins and limited trading opportunities in other agri-commodities,” it added.
The company's performance during the quarter was relatively subdued due to severe pressure on the legal cigarette industry and sluggish demand conditions prevailing in the FMCG industry
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