ITC reports 3% rise in Q2 profit, beats revenue estimate | Mint

New Delhi: ITC Ltd on Thursday reported a 3.08% rise in standalone net profit in the September quarter, slightly below street estimates, on account of greater expenses during the reporting period.

Net profit at the maker of Gold Flake cigarettes and Bingo chips stood at ₹5,078.34 crore in the three months through September, versus ₹4,927 crore a year earlier.

A Bloomberg poll of analysts had estimated ₹5,150 crore in net profit.

Revenue from operations grew 16% to ₹20,537.35 crore, from ₹17,705.08 crore a year ago. The revenue for the quarter exceeded Street estimates of ₹18,070 crore.

What dragged domestic demand?

A combination of factors such as a resurgence in food inflation and excessive rains during the quarter dragged domestic demand. Subdued demand conditions, unusually heavy rains in parts of the country, high food inflation, and sharp escalation in certain input costs (leaf, wood, etc.) were witnessed during the quarter, the company said.

“The Indian economy continues to demonstrate macro-economic stability even as high frequency indicators such as automobile sales, bank credit and personal loan growth, credit card transaction volumes, GST collections, merchandise exports growth, manufacturing PMI, etc. pointed to a deceleration in the pace of economic activity during the quarter. The quarter also witnessed excessive rains in August and September and a resurgence in food inflation which led to CPI hitting a nine-month high,” the company said in its earnings statement Thursday evening.

The combination of these factors along with inflationary trends in commodity prices weighed on consumption expenditure and the FMCG sector. Despite the near-term headwinds, the Indian economy continues to be “extremely resilient” on the back of multi-dimensional and purposeful policy interventions by the government and its thrust on creating physical, digital, agri and rural infrastructure.

ITC reported earnings before interest, taxes, depreciation, and amortization, or Ebitda, of ₹6,340 crore up 4.9% year-on-year slightly below consensus estimates.

However, expectations of a good crop output, anticipated moderation in inflation, improving agri terms of trade, and the government’s thrust on public infrastructure, and the rural sector augur well for a pick-up in consumption demand, ITC said.

The company sells cigarettes, flour and operates hotels apart from running a large agriculture business.

During the quarter the company’s cigarette volumes grew 3.3% quarter-on-quarter, surpassing analyst expectations. Cigarette revenue was up 6.8% year-on-year to touch ₹8,177.27 crore.

“Market standing continues to be reinforced through strategic portfolio and market interventions with focus on competitive belts and to counter illicit trade,” the company said.

ITC mitigated severe cost escalation in leaf tobacco through cost management and calibrated pricing actions.

Meanwhile, the company’s FMCG business reported a 5.4% jump in quarterly revenues to ₹5,577.73 crore with categories such as staples, biscuits, snacks, frozen snacks, dairy, premium soaps, homecare and agarbatti driving growth. 

ITC sells brands such as Bingo chips, Aashirvaad flour, Fiama soaps and Sunfeast cookies.

“Incessant rains and flooding in certain parts of the country adversely impacted categories with higher salience of discretionary and out-of-home consumption. Inflationary headwinds were witnessed across several key inputs (edible oil, wheat, maida, potato etc.) during the quarter,” the company said.

ITC continues to witness high competitive intensity in certain categories such as noodles, snacks, biscuits and soaps. 

The company’s agri business reported a 47% jump in September quarter revenue led by leaf tobacco and value added agri products. “The value-added agri portfolio (including coffee, fruits and vegetables, spices, etc.) recorded robust growth during the quarter. The business continues to leverage the multi-dimensional capabilities of its state-of-the-art value-added spices processing facility in Guntur to scale up exports,” the company said.

The company’s hotels segment benefitted from demand related to food and beverages, retail and wedding segments. Segment revenue was up 12.1% year-on-year.

The company beat street estimates on revenue and volumes, analysts said.  

“Another good news on revenue and volume, revenue ahead of ours and street estimates; Ebitda/PAT in line with ours and streets estimates,” said Abneesh Roy of Nuvama Institutional Equities.