About the Company
The brand is the identity of trust and has self identity in the country. It hardly need any introduction as the product of the company is used across the country in both retail and wholesale segment.
The company diversified into a whole lot of other things to mitigate the losses it might incur due to the persistent hike in excise duties on cigarettes. But given the current slowdown, looks like people are smoking more due to stress and keeping away from buying anything else.
The company has posted results for the third quarter ended
Higher Paperboard & Packaging revenues which grew by 17%, scale up of the Stationery and Personal Care businesses and superior product mix in cigarettes combined to more than offset the impact of a sharp slowdown in the hotels business.
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.
Losses in the consumer goods business were up this fiscal quarter due to the launch of personal care products such as soaps, shampoos, conditioners and shower gels. Infact the total loss incurred by this segment for all the three quarters stood at Rs.366 crore and there is one more quarter to go.
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.
About The Stock
The stock has one of the pillar of the stock market like Hindustan Unilever Limited who has not been ruined in the 2008 correction or bear phase , where all heavy weight has underperformed , while these two stocks has been able to maintain there levels.Partial investment could be made in this stock.
Disclaimer : I do not have any personal holding in this stock.