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ITC Q1 profit up 29%, revenues grow 37%

The company’s FMCG-others business reported segment revenue of  ₹3,726 crores, up 10.4% year‐on‐year, on a high base. (REUTERS)Premium
The company’s FMCG-others business reported segment revenue of 3,726 crores, up 10.4% year‐on‐year, on a high base. (REUTERS)

  • The maker of Aashirvaad wheat flour and Savlon soaps reported a 36.38% yoy growth in standalone revenue from operations at Rs12,959.15 crore, coming ahead of street estimates, albeit benefitting from a lower base in the year ago quarter when covid-led restrictions led to severe supply and demand disruptions

New Delhi: Cigarette-to-hotel conglomerate ITC Ltd on Saturday posted a 28.6% year-on-year (y-o-y) jump in standalone profit for the three months ended 30 June—coming below street expectations.

A Bloomberg poll of 12 analysts had forecast a net profit of 3,253.9 crore, while 11 analysts estimated ITC to report standalone revenue of 11,572 crore.

During the quarter the company reported a profit of Rs3,013.5 crore.

The maker of Aashirvaad wheat flour and Savlon soaps reported a 36.38% year-on-year growth in standalone revenue from operations at Rs12,959.15 crore, coming ahead of street estimates, albeit benefitting from a lower base in the year ago quarter when covid-led restrictions led to severe supply and demand disruptions. Sequentially revenues were down 8.4%.

“Localised lockdowns and mobility restrictions imposed by states in a bid to contain the sharp increase in daily Covid-19 infections in the second wave rendered the operating environment during the quarter extremely challenging and impacted the strong recovery momentum witnessed in recent quarters," the company said in a statement on Saturday evening.

However, the situation continues to improve with the progressive easing of restrictions and increased mobility from mid-June.

The company reported lower other income on account of lower market yields and treasury corpus limited the flow through to profit before tax and PAT which grew by 28.4% and 28.6% year-on-year, respectively, it added.

The company’s cigarettes business reported disruptions as the state-wide lockdowns in April and May impacted store timings and imposed mobility restrictions.

However, segment revenues were still up 33% to touch Rs5,122.19 crore. EBIT or earnings before interest, taxes, depreciation for the segment grew 36.7% to 3,220 crore.

“The strong volume recovery momentum witnessed in the second half of FY21 was impacted by localized lockdowns and restricted hours of convenience store operations in the wake of second wave of the pandemic," the company said in a statement to the exchanges.

Sales of cigarettes have improved week‐on‐week from mid‐June after as most markets returning to normalcy wave—barring in parts of Kerala, Odisha and the Northeast.

The company’s FMCG-others business reported segment revenue of 3,726 crores, up 10.4% year‐on‐year, on a high base.

This was driven mainly by demand for its hygiene products, fragrances, spices, snacks, dairy and agarbattis. Segment EBITDA or earnings before interest, taxes, depreciation, and amortization was up 16%.

The company’s Savlon range of disinfectant products drove demand for the portfolio during the quarter. However, demand for staples—that rose sharply in the same period last year —moderated as households went easy on pantry stocking.

Meanwhile, in the face of high escalation in input costs, the company took to judicious pricing and took to ongoing cost saving programmes.

Both urban and rural growth rates in the FMCG industry moderated in the immediate aftermath of the sharp rise in new cases; however there has been a progressive rebound since June’21 with the easing of restrictions and increase in mobility, it said in its statement.

Total expenses at the company were up 29% during the quarter. The company is driving relentless focus on cost reduction, it said.

Analysts tracking the company said the FMCG segment reported a “decent" performance. A lower base in the same quarter of the last year helped report strong revenue growth year-on-year.

“On sales and cigarettes volume growth started on a good note—ahead of our and street expectations. However, on a lower base. This implies that on a two-year basis cigarette volumes are still down 20%," Abneesh Roy, executive director, institutional equities, Edelweiss Securities said.

The FMCG business reported “decent" set of numbers, added Roy.

Segment revenue for the company’s agri business jumped 9.2% to touch 4,091.27 crore—led by growth in wheat, rice and leaf tobacco exports and soya in the domestic market.

Meanwhile, the second wave of the pandemic triggered a fresh round of mobility and travel restrictions leading to severe disruptions and impacting the recovery witnessed by the company’s hotels segment. Segment revenue for hotels declined 55.78% sequentially but grew well over 400% year-on-year to touch 127.24 crore.

Segment revenue for the company’s paperboards, paper and packaging segment was up 54% year-on-year.

Overall, ITC continues to “closely" monitor the situation and will respond with agility to enhance its market standing while managing risks associated with the heightened uncertainties in the business environment, the company said in a media statement.

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