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Informist, Thursday, Feb. 6, 2025

 

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--ITC Oct-Dec net profit INR 56.38 bln
--Analysts saw ITC Oct-Dec net profit INR 51.55 bln
--ITC Oct-Dec net profit INR 56.38 bln vs INR 55.72 bln year ago
--ITC Oct-Dec revenue INR 182.90 bln vs INR 168.64 bln year ago
--ITC to pay INR 6.50 per share interim dividend
--ITC Apr-Dec net profit INR 156.34 bln vs INR 154.02 bln year ago
--ITC Apr-Dec revenue INR 557.42 bln vs INR 503.85 bln year ago
--ITC Oct-Dec cigarettes revenue INR 81.36 bln vs INR 75.49 bln year ago
--ITC Oct-Dec hotels revenue INR 9.22 bln, up 14.6% on year
--ITC Oct-Dec paper ops revenue INR 21.44 bln, up 3.1% on year
--ITC Oct-Dec agri division revenue INR 33.51 bln, up 9.7% on year
--ITC Oct-Dec EBITDA margin 40%, up 450 bps on year
--ITC Oct-Dec EBITDA INR 3.68 bln, up 29% on year
--ITC:Oct-Dec performance resilient amid subdued demand, rise in input cost
--ITC:Higher leaf tobacco cost partially mitigated via product mix enrichment

 

By Avishek Rakshit

 

KOLKATA – Rising income from nearly all of its business segments, especially from cigarettes and agricultural trading business, helped ITC report revenues in line with the Street expectations. It's one-time gain boosted net profit, helping the company beat Street estimates.

 

The cigarettes-to-soap major reported a comparable net profit of INR 56.4 billion for the December quarter, up marginally on year. The net profit, however, includes an exceptional component of INR 5.3 billion, which ITC earned by acquiring shares of EIH Ltd. and HLV Ltd. from one of its subsidiary company, Russel Credit Ltd. Discounting this one-time gain, which arose primarily as a consequence of the demerger of its hotels business, ITC's net profit from its three major business segments was INR 51.1 billion as against the Street's estimate of INR 51.6 billion. It is, however, not clear if the brokerages had factored in this one-time gain when estimating the company's earnings. 

 

The company's comparable revenue, excluding the demerged hotels business, grew over 8% on year to INR 182.9 billion in the December quarter, with cigarettes accounting for 45% of the revenue. The country's second-largest consumer goods company had reported a comparable net profit of INR 55.7 billion and a comparable revenue of 168.6 billion in the year-ago quarter. The company's net profit from continuing operations, or after excluding the profit from the demerged hotels business, was INR 54.21 billion, almost unchanged from INR 54.19 billion in the year-ago quarter.

 

 

While the demerger stripped ITC of direct control on the hotel assets, the company continues to directly own ITC Grand Central Hotel in Mumbai. The revenue and pre-tax profit from this hotel during Oct-Dec, at INR 446.4 million, and INR 181.5 million respectively, were reported by ITC under 'Others' business segment.

 

ITC's revenue from the cigarettes business – the biggest revenue generator -- rose by 8.1% on year to INR 81.4 billion. The revenue growth came by expanding market reach, essentialy to places where competition has a stronger hold. Stable cigarette prices also continued to help the company bag market share from the illicit trade, which the country's dominant cigarette company earlier lost due to an extremely high price disparity.

 

Although ITC does not state the growth in sales volume of cigarettes, the company said in a statement that revenue growth from this business was volume-led during Oct-Dec.

 

ITC continued to revamp its cigarettes portfolio and drive democratisation of the premium brands, which are also the key strategic growth drivers. The company's pre-tax profit from cigarettes rose by 4% on year to INR 49.2 billion accounting for around 70% of the company's total pre-tax profit in the December quarter.

 

The ongoing sharp cost escalation in leaf tobacco was partly mitigated through improved mix, calibrated pricing, and focused cost management initiatives for the cigarettes business, leading to a 4.1% growth in profit before interest and tax, or PBIT, ITC said in a statement. The company reports PBIT for its business segments, which roughly translates into the operating profit.

 

Despite muted demand conditions and cost pressures, ITC's revenue from the non-cigarettes consumer goods business rose by 4% on year to INR 54.2 billion. Categories which drove the growth in this portfolio were flour (packaged atta), spices, snacks, frozen snacks, dairy, premium personal wash, homecare and incense sticks.

 

It is on account of the opportunity in the value-added snacks and meals, ready-to-cook products, and related product segments, that made ITC sign a definitive agreement Thursday to acquire the Prasuma brand of frozen, chilled and ready-to-cook foods from Ample Foods Pvt. Ltd., Chao Chao Foods Pvt. Ltd. and Meat and Spice Pvt. Ltd. in three tranches.

 

As per the agreement, ITC will initially acquire a total 62.5% stake in Ample Foods for INR 1.9 billion in two tranches which will be completed by April, 2027. Thereafter, ITC will take over the remaining 37.5% stake in Ample Foods and 100% stake in Meat and Spice by end of June 2028.

 

During Oct-Dec, ITC faced severe inflationary headwinds in several key input materials like edible oil, wheat, maida, potato, cocoa, packaging materials, and others. The impact of sharp escalation in key input costs was partially offset through focused cost management, calibrated pricing actions and premiumisation, ITC said.

 

Nevertheless, ITC's pre-tax profit from the non-cigarettes consumer goods business tanked by nearly 26% during the December quarter to INR 3.2 billion.

 

In the strategic agricultural business, which provides ITC trading opportunities primarily in commodities like tobacco and wheat, and also acts as a sourcing channel for its consumer goods business, the company reported a revenue growth of nearly 10% on year at INR 33.5 billion. The pre-tax profit rose sharply by around 21% on year to INR 4.1 billion. Leaf tobacco and value added agricultural product exports led to the segment's financial performance. The PBIT was up 21.6% on year.

 

In the paper and paperboards business, ITC faced some headwinds as the operating environment remained challenging with low-priced Chinese and Indonesian supplies in global markets including India. Alongwith soft domestic demand conditions, and unprecedented surge in domestic wood costs and subdued realisations, ITC's revenue from this business increased by over 3% on year to INR 21.4 billion. The pre-tax profit, however, fell sharply by over 30% on year to INR 2.1 billion.

 

However, the demerged hotels business registered its best ever quarterly performance. Despite a high base, revenue was up 14.6% on year to INR 9.2 billion, and the net profit galloped by 41% on year to INR 2.2 billion. The earnings before interest, tax, depreciation, and amortisation margin from hotels expanded by 450 basis points during the quarter.

 

ITC's EBITDA for Oct-Dec was INR 3.7 billion, up 29% on year, and overall EBITDA margin increased by 450 basis points on year to 40%.

 

During Apr-Dec, ITC reported a net profit of INR 156.3 billion, up 1.5% on year on revenues of INR 557.4 billion, up nearly 11% on year. The company's board approved an interim dividend of INR 6.5 per share.

 

ITC declared its December quarter results after market hours. Thursday, shares of ITC closed nearly 2% down at INR 441.1 on the National Stock Exchange. End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Deepshikha Bhardwaj

 

 

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