ITC : Profit Before Tax up 18.2%

Click here to download the Financial Results

Financial Results for the Quarter ended 30th June, 2014

Profit Before Tax up 18.2%

The Company recorded another strong performance  during the quarter with robust growth in revenue and profits despite a challenging  business environment. Net Revenue for the quarter grew by 24.9% to Rs. 9164.42  crores, driven by Agri Business and FMCG Segments. Profit Before Tax increased  by 18.2% to Rs. 3265.67 crores while Net Profit at Rs. 2186.39 crores registered a growth of 15.6%. Earnings Per Share for the  quarter stood at Rs. 2.75.

FMCG-Others

The Branded Packaged Foods Businesses posted healthy growth in revenues during the quarter, despite sluggish demand  conditions and a marked deceleration in industry growth rate. In the Staples,  Spices and Ready-to-Eat Foods Business, 'Aashirvaad' atta sustained its  high growth trajectory consolidating its leadership position across markets. In  the Bakery and Confectionery Foods Business, the recently launched  'Sunfeast Farmlite' range of cookies in the health segment continues to garner  increasing consumer franchise. The Business also rebranded its offerings in the  mid-price cream Biscuits segment under the 'Sunfeast Bounce' sub-brand for  sharper positioning in the market. In the Snack Foods Business, 'Bingo!'  registered robust growth driven by the finger snacks portfolio comprising the  'Mad Angles', 'Tangles', 'TedheMedhe' and 'GalataMasti' sub-brands. The  'Original Style' variants of Bingo! Yumitos potato chips, launched in Feb'14,  gained good traction in launch markets. In the Instant Noodles category,  'Sunfeast YiPPee!' continued to record healthy growth leading to improvement in  market standing.

During the quarter, the Personal Care  Products Business expanded its portfolio in the Deodorant category with the  addition of two new variants each for men and women, taking the total number of  variants under the 'Engage' brand to 14. Engage has garnered impressive market  standing in a relatively short span of time and continues to gain traction in  the market.

The Education  & Stationery Products Business consolidated its position as the leading  and fastest growing player in the Indian Stationery market. During the quarter,  the Business further expanded its presence in the popular segment of notebooks  with the extension of the 'Saathi' brand in more markets.

Cigarettes

While legal cigarettes account for less  than 12% of overall tobacco consumption in the country, they contribute over  85% of the total tax revenue from the tobacco sector accruing to the exchequer.

High incidence of taxation and a  discriminatory regulatory regime on cigarettes in India have, over the years,  led to a significant shift in tobacco consumption to lightly taxed or tax  evaded tobacco products like Bidi, Khaini, Chewing Tobacco and Gutkha. These  cheaper and revenue inefficient products presently constitute over 88% of total  tobacco consumption in the country. It is pertinent to note that tobacco  consumption in the form of legal cigarettes declined from 86 million kg. in  1981-82 to 68 million kg. in 2013-14 even as total tobacco consumption in India  increased from 406 million kg. in 1981-82 to 577 million kg. in 2013-14. Thus,  while overall tobacco consumption is increasing in India, the share of legal  cigarettes in overall tobacco consumption has progressively declined from 21%  in 1981-82 to below 12% in 2013-14.

The steep increase in Excise Duty on  cigarettes for the third year in succession as announced in the Union Budget  2014 along with further increase in Value Added Tax (VAT) on cigarettes by some  States during the quarter will exertfurther pressure on legal industry volumes  and sub-optimise the revenue potential from the tobacco sector. Further, the  sharp increase of 72% in the Excise Duty rate applicable for filter cigarettes  of 'length not exceeding 65 mm' will make it extremely difficult for the  legitimate industry to counter the menace of illegal cigarettes which continues  to grow unabated in the country.

The imposition of discriminatory and  punitive VAT rates by some States provides an attractive tax arbitrage  opportunity resulting in the growth of illegal cigarettes, thus depriving the  State Governments of their legitimate revenue share. Punitive tax rates on  cigarettes have proved detrimental to revenue collection leading to a  multi-fold increase in illegal trade of cigarettes without any visible decrease  in overall tobacco consumption. Steep increase in VAT rates lead to a sharp  drop in legal cigarette sales even as illegal and duty evaded cigarettes gain  significant traction leading to loss of potential tax revenues to the State  exchequer.

The Company will continue to engage with  the concerned authorities, both at the Central Government and State level,  highlighting the need for moderation in tax rates on cigarettes to maximise the  revenue potential from the tobacco sector and contain the growth of the illegal  segment.

Despite the  challenging operating environment as mentioned above, the Company's unwavering  focus on providing world-class products to consumers enabled it to sustain its  leadership position in the industry. Consumer centricity, product innovation  and quality processes have enabled the Business to deliver superior value.  Several initiatives were launched during the quarter across the portfolio in  terms of pack modernisation and introduction of new variants with a view to  consolidating market standing.

Hotels

The  hospitality sector continued to be adversely impacted by the weak economic  conditions and high levels of room inventory in key Indian cities leading to a  relatively weak pricing scenario. Consequently, growth in Segment Revenues  remained muted during the quarter. Segment Results of the Hotels Business  include Rs. 14.3 cr. towards additional depreciation charge for the quarter due  to revision in the useful life of fixed assets in accordance with the  provisions of Schedule II to the Companies Act, 2013.

During the  quarter, the Business commissioned 'My Fortune Bengaluru', a 115-room flagship  property under the Fortune banner in the 'upscale' segment. Significant  progress was made during the quarter towards construction of ITC Grand Bharat -  a super luxury golf and spa resort - at the Classic Golf Resort, Manesar. The  project is nearing completion with the hotel expected to commence operations  shortly. Construction activity at the luxury hotel projects in Kolkata and  Hyderabad is progressing satisfactorily.

Contribution to Sustainable Development

The Company's Social Investments  Programme aims to address the challenges arising out of poverty, environmental  degradation and climate change through a range of activities with the  overarching objective of creating sustainable sources of livelihood for  stakeholders.

The footprint  of the Company's Social Investments Programme has spread to 61 districts across  the country and can be viewed at a glance in the following chart:

Intervention Areas	Unit of Measurement	Cumulative till date
Total Districts Covered	Number	61
Social and Farm Forestry Soil and Moisture Conservation Programme	Hectare Hectare	164,551    161,427
Sustainable Agricultural Practices        Compost Units	Number	20,274
Sustainable Livelihoods Initiative        Cattle Development Centres        Animal Husbandry Services	Number Artificial Insemination doses (in lakhs)	256       13.78
Economic Empowerment of Women       Self Help Group Members       Livelihoods created	Persons Persons	20,508    42,568
Primary Education       Beneficiaries	Children ( in lakhs)	3.58
Health and Sanitation       Low Cost Sanitary Units	Number	4,686

The Board of Directors, at its meeting in  Kolkata on 29th July 2014, approved the financial results for the quarter ended  30th June 2014, which are enclosed.

Click here to download the Financial Results