ITC’s net profit up 38.35 per cent in June quarter; beats street guess

New Delhi ITC Ltd on Monday beat Street expectations with a rise of 38.35 per cent in standalone net profit for the June quarter. Profit climbed in three months ended June 30 4,169.38 crore from 3,013.49 crore a year ago.

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

profit exceeded 3,949 crore estimated in a Bloomberg poll of 38 analysts. Revenue, too, exceeded K Street estimates 15,094 crore.

“Economic activity picked up further during the quarter with a pick-up in trade and consumer sentiments. However, geopolitical tensions and frequent supply chain disruptions resulted in hardening of commodity prices and exacerbated the unprecedented inflationary conditions prevailing in the economy. “Inflation constraints also manifested in weaker consumption spending with volumes being under pressure, especially 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 operational areas during the quarter sequentially and from a year ago.

However, while the trajectory of inflation remains a key watchdog, prospects of a favorable monsoon and the recent moderation in prices of key commodities as well as proactive interventions by the government and the Reserve Bank of India (RBI) augurs well for sustained economic recovery. And ITC said consumption spending picked up.

The maker of Bingo Chips and Gold Flake cigarettes said March quarter spending grew 39.6% from a year ago 13,093.30 crore while earnings before interest, tax, depreciation and amortization (Ebitda) were 5,646 crore.

Analysts said ITC outperformed Street estimates across sectors with a strong performance. Analysts at ICICI Securities said the current quarter’s sales growth for the company led to a full recovery across sectors. “ITC’s Q1FY23 results were above our estimates on the revenue, operating profit and earnings front. The growth in revenue was supported by strong growth in the cigarette, agribusiness, paperboard business and FMCG business.

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“Based on three-year CAGR (Compound Annual Growth Rate), Cigarette, Agriculture, Paper-board, FMCG and Hotel business saw sales growth of 6.7%, 27.4%, 14.1%, 13.3% and 12.2% respectively. “With no major price interventions in cigarettes over the past one year, we believe volume growth to be close to 25% with some product mix improvement,” ICICI Securities said.

Overall gross margin declined by 162 basis points, analysts said, mainly due to higher commodity inflation in the key raw material of the FMCG business apart from higher contribution from agriculture sales during the quarter. FMCG revenue up 19.4% in the quarter 4,451.39 crore, while cigarette revenue up 29% 6,608.98 crores.

ITC posted strong growth in discretionary and out-of-home categories; Staples and convenience food sales, powered by brands like Sunfeast Biscuits, Sunrise Spices, Ashirwad Salt and Ashirwad Swasti Dairy Products. The reopening of educational institutions has seen a resurgence in its business of education and stationery products. Although sales of ITC’s hygiene portfolio remained low, they were higher than pre-pandemic levels.

“Segment Ebitda margin intact despite unprecedented commodity inflation; The sharp increase in input costs was mitigated through multi-pronged strategic interventions,” it added.

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