MUMBAI (Commodity Online): India’s leading multi-product FMCG company, ITC Ltd (BOM: 500875) posted better than expected financial results for the second quarter ended 30th September 2009.
Company’s net sales grew by 12.5% year on year (yoy) to Rs.4,345.3 crore in Q2FY2010. This was on the back of strong growth in the cigarette business and agribusiness revenues.
Pay low, earn more through Commodity Trading TipsCompany’s cigarette business registered an impressive growth of 15.3% yoy in the gross sales (the net sales grew by 21.4% yoy) in Q2FY2010. Experts believe the impressive growth in the cigarette business revenues was led by the sustenance of good volume growth and price increases implemented by the company.
This coupled with the better revenue mix pushed the profit before interest and tax (PBIT) margin up by 217 basis points yoy to 29.9% during the quarter.
The growth rate in the non-cigarette fast moving consumer goods (FMCG) business recovered with the gross sales growing by 14.0% yoy in Q2FY2010, which was better as compared with the 9.5% yoy growth in Q1FY2010. Also the PBIT losses in the non-cigarette FMCG business came down to Rs.85.0 crore in Q2FY2010 as compared to Rs.116.6 crore in Q2FY2009 and Rs.99.8 crore in Q1FY2010.
As anticipated, the hotel business’ gross sales declined by 25.2% yoy to Rs.186.3 crore due to lower occupancies and decline in the average room rate. The PBIT margin of the hotel business stood at 16.9% in Q2FY2010 as compared to 27.6% in Q2FY2009.
Company’s agribusiness posted a stellar performance, with the gross revenues growing by 19.0% yoy to Rs.1,028.3 crore and the PBIT margin improving by a sharp 820 basis points yoy to 16.9% during the quarter. According to analysts, the sharp increase in the profitability of the agribusiness was led by ITC’s shift to high-margin commodity business and increase in leaf tobacco exports, which has higher margin.
Despite the sharp decline in the hotel business’ profitability, the company posted better operating profitability due to an improvement in the cigarette business’ margin, lower losses in the non-cigarette FMCG business and a higher margin in the agribusiness.
On an overall basis, the operating profit margin (OPM) improved by 513 basis points yoy primarily due to a sharp 399 basis points yoy decline in the other expenses as percentage to sales and lower raw material cost as percentage to sales. Thus the operating profit registered a strong growth of 30.8% yoy to Rs.1,590.1 crore during the quarter.
The strong operating performance led to a 25.8% yoy growth in the adjusted net profit to Rs.1,009.9 crore.
