ITC Diversified FMCG Company Stay Invested

Third quarter ended 31st Dec 2008, Net Turnover at Rs.3833 crore grew by 11%. Cigarette revenue grew by 17%. It is pertinent to note that cigarettes still account for 40% of ITC’s revenues and contribute 87% to the bottomline.

The decline in hotel revenues consequent to the economic slowdown and the unfortunate terror strikes in Mumbai, the continuing impact of high commodity prices and store rentals, brand building costs of the new Personal Care portfolio and the significant investments in augmenting distribution infrastructure and systems combined to exert intense pressure on profitability during the quarter. Hotels business has declined by 14%. The agri business revenues de-grew by 6% due to lower soya volumes and rationalisation of the agri-commodity portfolio. Consequently, pre-tax profits at Rs.1331 crore registered a slower growth of 8.5% over the same period last year. Net profit grew by 8.7% to Rs. 903 crore.

ITC is not a pure FMCG company unlike the others. So it would be wrong to assume that the low inflation would help the company reduce its costs and thus improve its margins. The hotel, agri, paper and cigarette business would surely have a much higher impact on the margins. It is expected to end FY09 on more or less a flat note. thanks