Agri drags ITC Q2 revenue as excess rains hurt demand, profit up 4%

Cigarettes-to-atta conglomerate ITC Ltd reported a nearly 2% year-on-year decline in consolidated revenue from operations to ₹21,047 crore, even as profit after tax increased 4.2% to ₹5,187 crore. ITC's agri business was the primary drag on the company's revenue; without this segment, the company's gross revenue grew 7.9%.

A strong performance by ITC Hotels and ITC Infotech boosted consolidated revenue for the company, while its mainstay cigarettes business grew 6.8% year-on-year (y-o-y) to ₹8,723 crore, helped by growth in the premium segment.

Meanwhile, ITC's FMCG (fast-moving consumer goods)-Others business (excluding notebooks) grew 8% to ₹5,964 crore, helped by a jump in sales of staples, dairy, premium personal wash, and agarbattis, the company said in a press statement.

Also, ITC's ‘digital first’ portfolio of acquired brands hit an average revenue run rate of ₹1,100 crore; this unit comprises mom-and-baby brand Mother Sparsh, healthy snacking brand Yogabar, frozen meats and ready-to-cook brands Prasuma and Meatigo and organic staples brand 24Mantra. ITC acquired the last three brands this year.

However, the company said the figures for its FMCG-Others portfolio were not strictly comparable because of the impact of 24Mantra's acquisition and amalgamation into the company.

A cut in goods and services tax (GST) rates of staples and key personal care items led to an over 50% decline in prices of ITC's FMCG portfolio, the company said.

Mixed Bag

A slowdown in consumer demand and extreme weather has affected sales of all major FMCG companies. ITC said excessive rain affected their sales this quarter, much like its rival Hindustan Unilever Ltd. Demand is recovering, but the trends are mixed, it added.

“Excessive rains in many parts of the country and transition to the new GST regime posed operational challenges causing short-term business disruptions,” the company said in a stock exchange filing. “Strong performance continues in premium portfolio and NewGen channels.”

“While rural demand continued to demonstrate resilience, urban consumption witnessed uptick,” the company said in its statement. “On the other hand, industrial growth, core sector growth, automobile sales, credit growth and electricity & fuel consumption remained relatively subdued.”

But a drop in consumer inflation, along with income tax cuts in this year's Union Budget and the more recent GST rate cuts, are expected to boost consumer demand in the second half of this financial year, ITC said, in line with its other FMCG peers.

Shares of ITC ended 0.5% lower on Thursday, as against the benchmark Nifty 50's 0.7% lower closing.