ITC Ltd.’s quarterly profit rose, beating estimates, led by a recovery in cigarette sales, discretionary businesses and a rebound in its hospitality segment as footfalls rose with the easing of pandemic-led restrictions.
Net profit of the owner of Aashirvaad and Sunfeast brands rose 6% sequentially to Rs 3,713.8 crore in the quarter ended September, according to its exchange filing. That compares with the Rs 3,490.1 crore consensus estimate of analysts tracked by Bloomberg.
Revenue of India’s largest cigarette maker increased 13% over the preceding three months to Rs 14,844.4 crore, against the Rs 13,076.5 crore forecast.
Other Highlights (QoQ)
Operating profit rose 14% to Rs 5,017.6 crore, against the Rs 4,561.8-crore forecast.
Margin came in at 33.8% against 33.5% despite higher commodity inflation.
Cigarette segment’s revenue rose 10.5% to Rs 6,219.8 crore.
Revenue of the remaining FMCG business rose 2.9% to Rs 4,043.8 crore.
Hotel revenue jumped 3.6 times to Rs 311 crore as travel demand surged, particularly in the leisure segment.
Agri-business revenue declined 7.2% to Rs 2,823 crore.
Paper-board volumes hit a record high; revenue rose 25.4% to Rs 1,829.7 crore
“The quarter witnessed broad-based recovery in sales across markets and channels. Reduction in the intensity of the pandemic along with a pick-up in the pace of vaccination led to improvement in the demand environment and consumer sentiment during the quarter,” the company said in a statement. However, “unprecedented” inflation in key input costs coupled with significant disruptions in global supply chains and logistics weighed on the operating environment, it added.
FMCG- Cigarettes
After severe disruptions in the first quarter, faster recovery seen in volumes versus the first wave with progressive normalisation of convenience store operations across markets, the company said.
Segmental Ebit rose 11.2% on a quarter-on-quarter basis. Certain markets in Kerala and East remain relatively subdued.
Recent launches include differentiated offerings anchored on the vectors of filters, variants and packaging formats-Classic Connect, Gold Flake Neo SMART Filter, Gold Flake Kings Mixpod, American Club Smash, Wave Boss and Flake Nova.
Modernised and refreshed packs of Flake Excel, Wills Navy Cut Filter, Berkeley Hero launched in focus markets.
Its multi-channel distribution network comprises traditional channels, convenience outlets and stockists network. Stockists’ network and rural servicing infrastructure were scaled up to 2.1x and 1.1x over the year-ago period.
The company said it has reinforced its market share, leveraging a portfolio of world-class products, focused innovation and agile execution
The legal cigarette industry volumes remain impacted on account of high tax incidence
FMCG-Others
Segment Ebit rose 35% quarter-on-quarter to Rs 403 crore.
The quarter has seen a sharp rebound in discretionary, out-of-home consumption on the back of improved mobility even as at-home consumption moderated.
Staples and convenience foods witnessed moderation on a high base of a year earlier even though it remains well above pre-Covid levels. The segment performed well on a sequential basis for the second consecutive quarter.
Hygiene portfolio continues to witness marked demand volatility; moderated sequentially in line with lower intensity of the pandemic but remains significantly above pre-pandemic level
Closure of educational institutions continues to impact education and stationery products business.
Sharp escalation in input costs offset largely through focused cost management actions, premiumisation, judicious pricing actions, fiscal incentives and favourable business mix.
Modern trade sales grew strongly on the back of improved mobility and store footfalls
E-commerce sales posted robust growth on the back of new product introductions including digital first brands. The channel salience stood at 7% in the first half of the year–thrice that of the first six months in FY20.
Market coverage and direct outlet servicing at 1.4x and 1.1x of last year’s levels respectively.
The company has launched products in targeted markets, customised to regional tastes and preference. A case in point is ‘YiPPee!’ Max Masala.
Hotels
The business saw a “smart” sequential recovery with revenue now back to the level seen in January-March.
Marked improvement in occupancy (3x of Q2 last year) drives faster recovery in hotels.
Sharp growth in revenue driven primarily by domestic leisure travel and staycations even as business travel continues to gather momentum.
Structural cost management actions undertaken in the past year aided in reduction of controllable cash fixed costs by 31% over Q2 FY20, ITC said.
Average daily rate and revenue per available room have recovered both year-on-year and sequentially, but remain below pre-Covid levels.
The company has introduced sharply targeted packages catering to emerging trends and consumer needs along with focused communication campaigns to drive demand.
Welcomhotel brand footprint was scaled up to 22 properties with 2500 keys. The company said four more properties are in the pipeline
Continuing with the pursuit of its “asset-right” strategy, ITC launched two new brands–‘Storii’ and ‘Mementos’–to expand its footprint across the country through management contracts.
Agri Business
The Kolkata-based conglomerate witnessed strong growth in wheat, rice and leaf tobacco exports.
Restrictions in operations at “mandis” and auction platforms were countered by leveraging multiple sourcing models and multi-modal transportation networks
The Kolkata-based conglomerate said shortage in availability of shipping containers, port congestion and inclement weather towards the end of the quarter delayed customer call-offs.
Zero disruption in supplies despite significant operating challenges
The company has been rapidly scaling up the value-added product portfolio to accelerate growth. Currently, it has over 16 value-added products.
It leveraged the e-choupal network to provide strategic sourcing support to the branded packaged foods businesses with sharply aligned procurement strategies and market dynamics.
Export of high-quality spices continued to gain strong traction.
ITC Indivision Ltd., a wholly owned subsidiary, is setting up a new facility to manufacture and export nicotine and nicotine derivatives conforming to the U.S. and EU pharmacopoeia standards.
Paperboards, Paper & Packaging
The segment witnessed revival of demand across most end-user segments. However, some segments including publications, quick service restaurants and wedding card segments remain relatively subdued.
It delivered a strong performance in exports on a high base notwithstanding logistical challenges.
Higher realisations, investments in pulp import substitution, cost-competitive fibre chain, sharper focus on operational efficiency leveraging data analytics and Industry 4.0 enabled margin expansion despite escalation in key input prices.
Value added paperboards and carton packaging recorded robust growth during the quarter
The recyclable barrier paperboards ‘Filo’ series and biodegradable paperboards ‘Omega Series’ continue to gain robust customer franchises.
Among the other fast-moving consumer goods makers on the Nifty 50 that have declared results so far, Hindustan Unilever Ltd., thenation’s largest consumer goods maker, andNestle India Ltd. saw a rise in their profit and revenue in the July-September period.
But rising costs of everything from logistics to key raw materials signal tighter times ahead for these companies, though they said efforts are on to offset inflation with price hikes.
The results came after the close of the market hours.
Shares of ITC closed flat at Rs 238.4 apiece on Wednesday, compared with the 1% gain in the benchmark Nifty 50.
