ITC net profit up 38.35% in June quarter; beats street estimates

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    NEW DELHI : ITC Ltd, on Monday beat Street expectations with a 38.35% rise in June quarter standalone net profit. Profit in the three months ended 30 June climbed to 4,169.38 crore from 3,013.49 crore a year earlier.

    Operating revenue grew 41.3% to 18,320.16 crore from 12,959.15 crore a year ago.

    Profit surpassed the 3,949 crore estimated in a Bloomberg survey of 38 analysts. Revenue, too, exceeded Street estimates of 15,094 crore.

    “Economic activity gathered further momentum during the quarter with an uptick in business and consumer sentiments. However, geopolitical tensions and persistent supply chain disruptions resulted in hardening of commodity prices exacerbating the unprecedented inflationary conditions prevailing in the economy. Inflationary headwinds also manifested in subdued consumption expenditure with volumes coining under pressure, particularly in rural markets,” the company said in a statement on Monday.

    Against this backdrop, ITC focused on digital adoption, customer-centricity, execution and agility, which enabled it to deliver strong performance across all operating segments during the quarter, both sequentially and from the year earlier, it added.

    However, while the trajectory of inflation remains a key monitorable, prospects of a favourable monsoon and the recent moderation in prices of key commodities, along with proactive interventions by the government and the Reserve Bank of India (RBI) augur well for sustained economic recovery and a pick-up in consumption expenditure, ITC said.

    The maker of Bingo chips and Gold Flake cigarettes said March quarter expenses grew 39.6% from a year ago to 13,093.30 crore while earnings before interest, taxes, depreciation and amortization (Ebitda) stood at 5,646 crore.

    ITC beat Street estimates across segments with a strong performance, said analysts. Current-quarter sales growth accounts for a full recovery across segments for the company, said analysts at ICICI Securities. “ITC’s Q1FY23 results were above our estimates on revenue, operating profit and earnings front. Growth in revenue was supported by strong growth in cigarettes, agri business, paperboard business and FMCG business,” they added.

    “On a three-year CAGR (compound annual growth rate) basis, cigarettes, agri, paper-board, FMCG and hotels business saw 6.7%, 27.4%, 14.1%, 13.3% and 12.2% sales growth, respectively. Given no major pricing intervention in cigarettes in last one year, we believe volume growth would be closer to 25% with some product mix improvement,” ICICI Securities said.

    Overall, gross margins were down by 162 basis points largely due to higher contribution of agriculture sales during the quarter apart from high commodity inflation in key raw materials of the FMCG business, said analysts.FMCG revenue grew 19.4% in the quarter to 4,451.39 crore, while cigarette revenue rose 29% to 6,608.98 crore.

    ITC reported strong growth in discretionary and out-of-home categories; staples and convenience food sales, driven by brands such as Sunfeast biscuits, Sunrise spices, Aashirvaad salt and Aashirvaad Svasti dairy products. Its education and stationery products business bounced back with the reopening of educational institutions. Though ITC’s hygiene portfolio sales were subdued, it was higher than pre-pandemic levels.

    “Segment Ebitda margins sustained despite unprecedented commodity inflation; sharp escalation in input costs mitigated through multi-pronged strategic interventions,” it added.

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