New Delhi: ITC Ltd on Thursday missed Street estimates, with a mere 0.30% rise in standalone net profit in the June quarter, on account of higher expenses.
Net profit at the maker of Gold Flake cigarettes and Bingo chips stood at ₹4,917.45 crore in the three months through June, slightly higher than ₹4,902.74 crore a year earlier.
A Bloomberg poll of 19 analysts had estimated ₹5,160 crore in net profit.
Revenue from operations grew 7.2% to ₹18,219.74 crore, from ₹16,995.49 crore a year earlier. Revenue for the quarter exceeded Street estimates of ₹17,200 crore.
The company said moderating inflation, improving agri terms of trade, expectations of normal monsoons and the government's thrust on public infrastructure and the rural sector will bolster consumption demand, building on the green shoots of recovery that are visible in rural markets.
“While private consumption expenditure remains relatively subdued, the Indian economy continues to be extremely resilient amidst a global growth slowdown, on the back of multi-dimensional and purposeful policy interventions by the government, with sustained public expenditure in creating physical, digital, agri and rural infrastructure. India continues to be acknowledged as one of the fastest-growing major economies in the world with significant headroom for growth over the medium and long term,” the company said in its earnings release Thursday.
The Union budget 2024-25 provides a strong impetus to set in motion a virtuous cycle of investment and employment while ensuring macro-economic stability and enabling inclusive growth. Several far-sighted proposals address crucial areas such as employment and employability, MSMEs, climate emergency and next-generation agriculture. The nine priority areas, together with the road map for next-generation reforms, provide a directional thrust to the nation’s journey of economic transformation, it added.
At the same time, expenses rose 10.8% year-on-year to ₹12,366.27 crore during the quarter.
“ITC Q1 performance was largely mixed, with revenues growing by 7% while unfavorable mix led to decline in the operating profit margin during the quarter. Cigarette business and FMCG business faired well with 6-7% revenue growth and better margins, while agri and paperboard, paper & packaging saw dip in the profitability, impacting overall margins of the company. Cigarette business volume growth is likely to sustain with no increase in tax in the recent budget, while outlook for FMCG business is improving. Valuation continues to trade at a discount compared to large peers, which makes it a preferred pick in the space,” Kaustubh Pawaskar, deputy vice president - research, Sharekhan by BNP Paribas, said.
FMCG revenue (excluding cigarettes) grew 6.3% to ₹5,491.03 crore, driven by staples, snacks, dairy, personal wash, fragrances, homecare and agarbatti.
Extreme heatwave adversely impacted categories with higher salience of discretionary/out-of-home consumption, ITC said.
Segment Ebitda margins expanded 25 basis points year-on-year to 11.3%.
Competitive intensity remained high in certain categories such as biscuits, snacks, noodles, popular soaps, education and stationery products, including from local and regional players, the company added.
ITC said commodity prices were “largely stable” during the quarter. Certain items such as sugar, potato, choco cream and edible oil witnessed sequential uptick in prices.
Meanwhile, segment revenue for cigarettes increased 6% to ₹7,918.10 crore in the June quarter. A sharp escalation in costs of leaf tobacco and certain other inputs was largely mitigated through improved mix, strategic cost management and calibrated pricing.
On Thursday, ITC stock closed at ₹493.75, down 0.26%.
Meanwhile, revenue from the company’s agriculture business rose 22.2% year-on-year at ₹6,973.32 crore, driven by value-added agri products, leaf tobacco, and wheat.
“Geopolitical dynamics and climate emergencies have led to concerns over food security and food inflation globally. To ensure India remains food secure and food inflation is controlled, the government has imposed trading restrictions on agri commodities from time to time, consequently limiting business opportunities in the bulk commodity space,” it said.
The company’s paperboards, paper and packaging business reported a 6.8% year-on-year decline in quarterly revenues, hurt by low-priced Chinese supplies in India, muted domestic demand, and unprecedented increase in domestic wood costs.
“FMCG–others and cigarettes delivered resilient performance amidst subdued demand conditions. While green shoots of demand recovery emerged during the quarter in the paperboards, paper and packaging business, performance remained impacted largely due to cheap Chinese supplies in international markets including India and a surge in domestic wood prices,” the company said.
