More Stories

Informist, Thursday, Oct. 24, 2024

 

Please click here to read all liners published on this story

--ITC: Excessive rains, food inflation affected FMCG consumption in Jul-Sept
--ITC: Higher cost of leaf tobacco partially mitigated via pricing actions
--ITC: Higher cost of leaf tobacco partially mitigated via improved mix
--ITC: Saw sharp escalation in leaf tobacco input costs in Jul-Sept
--ITC: Saw subdued demand conditions in Jul-Sept
--ITC agricultural business EBIT up 27.5% on year in Jul-Sept
--ITC: Hotels segment EBIT up 20.2% on year in Jul-Sept
--ITC cigarettes business EBIT up 5.1% on year in Jul-Sept
--ITC Jul-Sept EBITDA INR 63.35 bln, up 4.9% on year
--ITC Jul-Sept non-FMCG revenue INR 223.77 bln vs INR 195.99 bln
--ITC Jul-Sept FMCG segment revenue INR 137.55 bln vs INR 129.49 bln
--ITC Apr-Sept revenue INR 387.57 bln vs INR 347.01 bln year ago
--ITC Apr-Sept net profit INR 99.96 bln vs INR 98.30 bln year ago
--ITC Jul-Sept revenue INR 205.37 bln vs INR 177.05 bln year ago
--ITC Jul-Sept net profit INR 50.78 bln vs INR 49.27 bln year ago
--Analysts saw ITC Jul-Sept net profit INR 51.08 bln
--ITC Jul-Sept net profit INR 50.78 bln
 

 

By Avishek Rakshit

 

KOLKATA – Increasing revenue and profit from the mainstay cigarette business and an exceptionally high rebound in its agricultural business led ITC Ltd. to not only offset the financial impact in its paper and paperboards business and muted profits from the non-cigarette consumer goods business, but also post results for Jul-Sept nearly in line with the Street's projections. ITC reported a profit after tax of INR 50.8 billion, registering a 3.1% on-year growth. The revenue was at INR 205.4 billion, growing 16% on year. The Street had estimated ITC to report a profit of 50.8 billion on revenues of INR 178.2 billion.

 

Although subdued demand conditions arising from unusually heavy rains in parts of the country and high food inflation impacted the profit growth in the non-cigarette consumer goods segment, the company’s cigarette sales and profits grew. Overall revenues from the fast-moving consumer goods segment grew 6.2% on year to INR 137.6 billion during Jul-Sept.

 

Cigarette sales, which usually account for 47% of ITC’s annual revenues, grew 6.8% on year to INR 81.8 billion in Jul-Sept, and the profit before tax increased 5.1% on year to INR 50.2 billion. In line with historical trends for the past several financial years, cigarettes accounted for 74% of its pre-tax profit in Jul-Sept. The growth in profits in cigarettes is despite leaf tobacco costs surging, and the company retaining its existing price points in core categories.

 

Comparatively, the non-cigarette consumer goods business, which majorly comprises branded food products, personal care items, office and school stationery, and other categories, saw an extremely muted profit growth. Revenue from this line of business increased 5.4% on year to INR 55.8 billion, but pre-tax profit grew only 0.7% on year to INR 4.4 billion.

 

In a statement, ITC said that the growth in cigarettes was on account of the company's initiatives to gain market share, especially where it has a relatively weaker presence, and reinforcing its strategic portfolio. The cost impact was partially mitigated through improved mix, strategic cost management, and calibrated pricing.

 

On the other hand, amid muted demand conditions and incessant rains negatively impacting out-of-home consumption, ITC focussed on its core brands and categories and leveraged its distribution channels to expand reach and sales. However, raw materials such as edible oil, wheat, maida, potato, and others rose during Jul-Sept. ITC said that it was largely able to mitigate these cost pressures by premiumisation, supply chain optimisation, calibrated pricing, digital initiatives, and strategic cost management.

 

Analysing the company's performance, a sector analyst with a domestic brokerage told Informist that ITC's revenue from cigarette sales was driven by a 3% increase in sales volume, which is in line with the projections. However, high leaf tobacco prices led the margins to fall by 101 basis points to 64.4%. ITC does not publicly declare its volume growth in cigarettes and the gross margins.

 

However, it was the agricultural business which was the prime revenue growth driver after cigarettes. While high leaf tobacco prices impacted ITC’s cigarette retailing business vertical, the same phenomenon benefited ITC’s agricultural business. High leaf tobacco prices and an increase in tobacco exports, among other factors, led ITC’s revenue from the agricultural business to surge by 47.1% on year to INR 57.8 billion, and pre-tax profit increased by a whopping 27.5% on year to INR 4.5 billion. The profit contribution from this business vertical to ITC’s total pre-tax profits overtook the profit from the non-cigarette consumer goods portfolio during Jul-Sept, and is only next to cigarettes.

 

ITC’s hotels business, which is soon to be demerged into a new listed entity, also registered strong revenue and profit growth. The revenue from hotels shot up by 12.1% on year at INR 7.3 billion, and pre-tax profit rose 20.2% to INR 1.5 billion driven by an uptick in food and beverage sales and wedding celebrations. The earnings before interest, tax, depreciation, and amortisation from hotels expanded by 70 basis points on year, mainly due to increasing revenues, operating leverage and strategic cost management initiatives.

 

It was the paper and paperboards business which continued to remain under demand and cost pressures. While revenue from this business increased 2.1% on year at INR 21.1 billion, pre-tax profit fell 23.2% on year to INR 2.4 billion. The operating environment remained challenging with low-priced Chinese supplies in global markets, including India, soft domestic demand, unprecedented surge in domestic wood costs, and subdued realisations, ITC said in a statement.

 

Overall, ITC’s EBITDA in Jul-Sept increased 4.9% on year to INR 63.4 billion, missing the Street’s estimates by around INR 1 billion.

 

ITC said that a favourable demographic profile, increasing affluence, rapid urbanisation, and accelerated digital adoption are some of the key growth drivers of the economy. Expectations of a good crop output, anticipated moderation in inflation, improving terms of commodity trading, and the government's thrust on public infrastructure and the rural sector augur well for a pick-up in consumption demand, it said.

 

The company’s board on Thursday approved to purchase 15.23 million equity shares of INR 2 each of EIH Ltd., and 3.46 million equity shares of INR 2 each of HLV Ltd. from Russell Credit Ltd – its wholly-owned subsidiary. The acquisition of shares will be done at their respective book value. It is being done to consolidate ITC’s shareholding in EIH and HLV. After the acquisition, the total shareholding of ITC in EIH will be 16.1%, and in HLV 8.1%.

 

The board also approved the purchase of the entire stake of Russell Credit in its step-down subsidiary Greenacre Holdings Ltd. at book value. Thursday, shares of ITC closed 1.8% down at INR 471.7 on the National Stock Exchange. The company declared its results after the market hours.  End

 

Edited by Manisha Baxla

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (22) 6985-4000 

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2024. All rights reserved.