ITC beats Street estimates with 17.5% rise in June quarter profit

ITC Ltd on Monday outperformed Street expectations with a 17.5% rise in standalone net profit for June quarter, helped by lower exp-enses. However, an ongoing ban on wheat export and a more recent ban on rice export hurt standalone revenue for the quarter that fell 7.2% to ₹16,995.49 crore from ₹18,320.16 crore a year ago.

The company, known for its Gold Flake cigarettes and Bingo chips, posted net profit of ₹4,902.74 crore for the quarter ended 30 June, up from ₹4,169.38 crore a year ago. The figures topped ₹4,817 crore estimate in a Bloomberg survey of 14 analysts.

Quarterly expenses fell 14.7% from year ago to ₹11,158.64 crore. Earnings before interest, taxes, depreciation and amortization grew 11% to ₹6,250 crore and margins expanded 6.82 percentage points. The global economy is facing a marked slowdown with high inflation and interest rates impacting economic activity, especially in advanced economies, ITC said.

“Against this backdrop, the Indian economy remains resilient, with buoyant tax collections, moderating inflation, credit growth uptick being some of the key positives amongst high frequency indicators,” it said in a statement.

“Consumer demand is witnessing incipient signs of recovery. However, risks from the external consumer price inflation (especially food); commodity price volatility; El Nino impact on monsoons and agri output—would be the key monitorables in the near term,” it said.

The company’s cigarette business reported revenue growth of 13% to ₹7465.27 crore up from ₹6608.98 crore reported a year ago. Cigarette volumes grew between 9-10%, said Amnish Aggarwal, Head Of Research, Prabhudas Lilladher Pvt Ltd.

ITC’s fast-moving consumer goods arm reported a 16% jump in quarterly revenues to ₹5,166 crores driven by demand in staples, biscuits, noodles, beverages, dairy, agarbatti and premium soaps.

Overall, input costs remained elevated compared to pre-pandemic levels, even as certain commodities witnessed moderation in prices on a high base of the previous year, the company said.

“The businesses continued to drive improvement in profitability through multi-pronged interventions viz. premiumisation, supply chain optimisation, judicious pricing actions, digital initiatives, strategic cost management and fiscal incentives,” ITC said commenting on the FMCG segment performance.

However, the company’s agriculture business reported a steep decline in quarterly revenue that was down 23.6% year-on-year to ₹5705.39. Restrictions imposed on wheat and rice exports in the backdrop of inflationary headwinds and food security concerns weigh on revenues, it said.

To be sure, ITC is the top exporter of wheat from India. “Geopolitical tensions have led to concerns over food security and food inflation globally. To ensure India remains food secure, government has had to impose restrictions on wheat and rice exports. These restrictions have resulted in lower business opportunities for the Agri Business during the quarter,” the company said.

Meanwhile, the company’s hotels business reported a 8.1% jump in quarterly revenue. Segment EBITDA margin was up 140 bps year-on-year to 33.9%, the company said. “Strong growth was witnessed in average room rates across properties, though occupancy moderated on a high base due to relatively fewer wedding dates during the quarter and pre-planned renovations,” the company said.

During the quarter, ITC IndiVision Limited (IIVL), a wholly owned subsidiary of the company, completed trials and obtained statutory clearances for its pilot plant at its Mysuru facility for the manufacture and export of nicotine and nicotine derivative products conforming to US & EU pharmacopoeia standards, it said.