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Business News/ Companies / Company Results/  ITC beats estimates with 13.7% profit growth in Q2
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ITC beats estimates with 13.7% profit growth in Q2

Rebound in out-of-home consumption and cigarette sales boosts net profit to ₹3,697.18 cr
  • ITC said standalone revenue from operations grew 12% to ₹13,553.52 cr in the Sep quarter
  • Overall, the quarter witnessed a broad-based recovery in sales across markets and channels, the company said of its September quarter numbersPremium
    Overall, the quarter witnessed a broad-based recovery in sales across markets and channels, the company said of its September quarter numbers

    ITC Ltd reported a 13.7% rise in fiscal second-quarter profit, beating analysts’ estimates, as its consumer goods business benefited from a rebound in out-of-home consumption and cigarette sales reported a faster-than-expected recovery.

    The net profit of the country’s largest cigarette maker rose to 3,697.18 crore in the three months ended 30 September from 3,252.62 crore in the year earlier, the company said on Wednesday. A Bloomberg survey of 16 analysts had pegged the quarterly profit at 3,639 crore.

    The company, which also sells Aashirvaad wheat flour and Savlon soaps, said its standalone revenue from operations grew 12% to 13,553.52 crore in the September quarter from 12,103.75 crore a year earlier, beating the 12,992.70 crore revenue estimate of 13 analysts.

    Overall, the quarter witnessed a broad-based recovery in sales across markets and channels, the company said of its September quarter numbers. ITC pointed out that a reduction in the pandemic’s intensity and a pick-up in the pace of vaccination led to an improved demand environment and consumer sentiment.

    “However, unprecedented inflation in key input costs coupled with significant disruptions in global supply chains and logistics weighed on the operating environment," it said.

    Cigarette segment revenue grew 10.2% to 5,641.72 crore from the year-ago period, and sales volume neared pre-covid levels, growing 9.5% from a year earlier.

    “After significant disruptions in the first quarter, cigarette volumes witnessed smart recovery with exit volumes at near pre-covid levels," the company said in its earnings release late Wednesday night.

    The numbers align with our expectations, said Abneesh Roy, executive director, institutional equities, Edelweiss Securities.

    Roy expects the company to report cigarette volumes to reach pre-covid levels by October. “We will watch out for cigarette volume growth in the third and fourth quarter and what the government panel on taxing tobacco products recommends," he added.

    The government has set up an expert group led by a senior health ministry official to prepare a comprehensive tax policy proposal covering all tobacco products from a public health perspective.

    Surprisingly, ITC’s FMCG-others business, which includes packaged food and personal care products, reported a 2.9% jump in segment revenues at 4,036.41 crore. The company reported a moderation in demand for staples and convenience foods on a high base. However, demand for such products, including its Aashirvaad wheat flour, remains well above pre-covid levels.

    The company pointed to higher-than-expected inflation in commodities such as edible oil, kraft paper, biaxially oriented polypropylene films, soap noodles, and metallocenes.

    ITC said that sharp escalation in input costs was offset through focused cost management actions, premiumization of products, judicious pricing actions and favourable business mix.

    FMCG companies have been reporting heightened demand for packaged foods and staples as home-bound Indians bought more pulses and spices and fewer discretionary products such as creams and hair colours.

    However, demand is now normalizing as consumers step out and start buying goods on the go.

    “The company reported a sharp rebound in out-of-home consumption on the back of improved mobility even as at-home consumption moderates. Discretionary and out-of-home portfolio too reported a sharp recovery both on a sequential and year-on-year basis," it added.

    Meanwhile, the company’s hygiene portfolio witnessed “demand volatility" as the intensity of the pandemic abated. Its flagship Savlon hygiene brand saw a moderation in demand, in line with the reduction in covid cases. Closure of educational institutions continues to impact the education and stationery products business, the company added.

    The company’s hotels business reported sequential growth, with revenues back to the levels prevailing in the March quarter; segment revenue was up 260% from a year earlier to Rs294 .73 crore in the September quarter, albeit on a low base.

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    ABOUT THE AUTHOR
    Suneera Tandon
    Suneera Tandon is a New Delhi based reporter covering consumer goods for Mint. Suneera reports on fast moving consumer goods makers, retailers as well as other consumer-facing businesses such as restaurants and malls. She is deeply interested in what consumers across urban and rural India buy, wear and eat. Suneera holds a masters degree in English Literature from the University of Delhi.
    Catch all the Corporate news and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
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    Published: 28 Oct 2021, 01:13 AM IST
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