Tobacco, paper units lift ITC's net by 17%

FMCG major ITC on Thursday posted a 17.4% growth in profit after tax for the first quarter of 2009-10 at Rs 878.70 crore, compared to Rs 748.67 crore in the corresponding period in 2008-09. Though the FMCG, driven primarily by cigarette sales, and paper and packaging businesses grew in net revenues by 19% and 16%, respectively, the overall growth of the quarter was muted at 4.7% largely due to the de-growth in the hotels and agri businesses.

According to Anand Shah, analyst with Angel Broking, the topline is under pressure due to the 48% decline in the hotels and agri businesses. "The company is being driven by its cigarette business which registered a 14.4% growth this quarter," he added.

"Though cigarettes are driving ITC profits, one area of concern is that the non-cigarette FMCG sector is slowing down," pointed out another analyst.

The squeeze on corporate travel along with the steep reduction in international travel as a fallout of the global financial crisis, Mumbai terror attacks and swine flu has triggered a significant slide in occupancies and average room rates. Net revenues from the hotel business for the quarter was pegged at Rs 172.81 crore, compared to Rs 238.97 crore in the same period last year.

In the agri business, net revenues stood at Rs 940.61 crore, down from Rs 1834.49 crore in the same period last year.

A company statement said though margins improved, investments in brand-building in the personal care and branded foods business continued to impact the segment results of the non-cigarette FMCG business. Celebrities like Kareena Kapoor, Shah Rukh Khan and Deepika Padukone endorse ITC brands.