ITC Q2 Results: Profit Beats Estimates On Steady Performance Across Verticals

ITC Ltd.'s quarterly profit rose, beating estimates, fuelled by continued growth in cigarette volumes and steady performance across businesses.

Net profit of the owner of Aashirvaad and Sunfeast brands rose 24% over a year earlier to Rs 4,619.77 crore in the quarter ended September, according to its exchange filing. That compares with the Rs 4,279.1 crore consensus estimate of analysts tracked by Bloomberg.

Revenue of India's largest cigarette maker increased 25% year-on-year to Rs 18,606 crore, against the Rs 17,602.9 crore forecast. Sequentially, however, revenues fell 6% dragged down by weakness in farm business.

Key Highlights (YoY)

• Operating profit rose 25% to Rs 6,259.1 crore, against the Rs 5,918.8 crore forecast.

• Margin came in at 33.6% against 33.8%, exactly in line with estimates.

• Cigarette segment's revenue rose 22.75% to Rs 7,635.4 crore as the business continues to counter illicit trade.

• Revenue of the remaining FMCG business rose 21% to Rs 4,894.3 crore, aided by price hikes and demand recovery across staples, convenience food and discretionary categories maintaining momentum.

• Hotel revenue jumped 80.16% to Rs 560.37 crore as travel demand surged. Sequentially, however, it fell 3.5%.

• Agri-business revenue rose 43% to Rs 4,038.74 crore driven by wheat, rice and leaf tobacco exports. It fell 46% over the June-ended quarter.

• Paperboards, paper and packaging segment revenue increased 25% to Rs 2,287.58 crore.

"Economic activity continued to gather momentum during the quarter along with improvement in business and consumer sentiment," the company said in a statement.

However, input prices remained elevated even as some commodities witnessed softening in the course of the quarter.

Inflationary headwinds, according to the company, continued to weigh on consumption expenditure, which was partly offset by early onset of festive season this year in some parts of the country.

"The anticipated moderation in inflation going forward, normal monsoons in most parts of the country and proactive interventions by the government and the central bank augur well for sustained recovery and a pick-up in consumption expenditure in the second half of the year."

Among other fast-moving consumer goods companies that have announced September quarter results so far, Nestle India Ltd. reported contraction in year-on-year margins due to high inventory costs, even as revenues outperformed estimates aided by price hikes, quick commerce aiding impulse segments and rural growth. This also suggests that categories like noodles and biscuits are seeing an upswing in demand as consumers downtrade from street food in a quarter of hyperinflation.

Tata Consumer Products Ltd. also saw profits and revenue beat estimates while margin woes continued amid high costs and weakness in the rupee.

However, early signs of stability in the prices of a few commodities, such as edible oils and packaging materials, bodes well for the upcoming quarters.

The Kolkata-based company has also reappointed Nakul Anand as a director and also as a wholetime director with effect from Jan. 3, 2023, for a one-year period.

Shares of ITC closed 0.97% higher ahead of the results on Wednesday, compared with a flat benchmark Nifty 50. The stock has gained 5.39% in the last five consecutive days, as against a 1.6% gain in the Nifty 50.

The results were announced after market hours.