ITC Ltd.’s revenue in the quarter-ended June declined, yet outdid analyst estimates, as did profit, almost.
Net profit of the consumer goods maker—also India’s largest cigarette maker—fell 16% over the preceding quarter to Rs 3,190.12 crore, according to its filing with stock exchanges. The consensus of analysts' estimates tracked by Bloomberg was Rs 3,253.9 crore.
Revenue fell 8% quarter-on-quarter to Rs 12959.15 crore, against the Rs 11,572-crore forecast.
Operating profit fell 11% to Rs 3,992.16 crore.
Operating margin stood at 30.8% versus 31.6%.
Cigarette segment’s revenue fell 12.6% to Rs 5,122.19 crore.
Revenue of the remaining FMCG business rose 1.0% to Rs 3,725.55 crore.
Hotels unit revenue fell 55.8% to Rs 127.24 crore.
Agri-business revenue rose 21.4% to Rs 4,091.27 crore.
"Localised lockdowns and mobility restrictions imposed by states to contain the sharp increase in daily covid-19 infections in the second wave rendered the operating environment during the quarter extremely challenging and impacted the strong recovery momentum witnessed in recent quarters," ITC said in a media statement.
Adding that there's been a week-on-week improvement since mid-June "with most markets returning to normalcy and witnessing faster recovery compared to first wave".
FMCG - Cigarettes
Strong volume recovery momentum witnessed in the second half of FY21 was impacted by localised lockdowns and restricted hours of convenience store operations, the company said.
Its multi-channel distribution network comprises traditional channels, convenience outlets and stockists network. Rural stockists network and rural servicing infrastructure were scaled up to 3x and 1.2x over the year ago period.
Certain markets in the south, metro cities and towns were relatively more impacted. Even now Kerala, Odisha and the North East remain partially impacted.
Wide availability of smuggled cigarettes continues despite actions by concerned authorities and remains a key challenge.
FMCG – Others
The company said urban and rural growth rates in the FMCG industry moderated in the immediate aftermath of the sharp rise in new cases; however there's been a rebound since June as restrictions eased.
The second wave too triggered an uptick in demand in staples and convenience foods but the trend of consumers stocking up essentials was far less pronounced compared to the lockdown phase last year. Besides, the base effect moderated year-on-year growth.
Discretionary and ‘out-of-home’ consumption products witnessed strong growth over the same period a year ago.
Consumer preference for ‘contactless shopping’ and home delivery, continues to gain prominence.
Market and outlet coverage is at 1.4x and 1.1x respectively compared to pre-covid levels.
The stockists network doubled year-on-year to target rural markets.
Direct-to-market shipments were also scaled up substantially in categories such as atta, snacks and biscuits.
The direct to consumer platform 'ITC e-store' is operational in 11 cities.
E-commerce sales more than doubled over the same period last year to 8% of segment revenue during the quarter.
Sharp escalation in input costs was mitigated through pricing and cost saving actions and higher margin business mix.
Second wave of Covid-19 infections and accompanying restrictions hurt the recovery witnessed in the October to March period, according to the media statement.
Domestic leisure segment witnessed an uptick in June. Welcomhotel properties tapped into the growing demand of travelers looking for getaways.
Home delivery and takeaway offerings performed well, doubling over the previous quarter. The offerings are currently operational in 17 cities across 24 ITC properties.
The company persisted with cost reduction measures to counter impact of negative operating leverage.
Paperboards, Paper & Packaging
Key segments such as pharmaceuticals and consumer goods saw a pick up in domestic sales, said ITC . Whereas, certain end-user segments such as publications, cupstock, on-the-go liquid packaging and wedding cards continued to be impacted.
Growth during the quarter was driven by value added paperboards, décor paper and carton packaging.
Exports recorded strong growth as customers sought higher inventory due to heightened uncertainty.
Higher imported pulp prices were mitigated by investments in substitutes and supply chain improvements.
Restrictions in operations at mandis and auction platforms were countered by leveraging multiple sourcing models and multi-modal transportation networks, the company said.
It witnessed strong growth in wheat, rice and leaf tobacco exports and soya in the domestic market.
Export of spices continued to gain traction.
ITC Indivision Ltd., a wholly owned subsidiary, is setting up a new facility to manufacture and export nicotine and nicotine derivative products
Shares of ITC closed 2.63% higher on Friday ahead of the earnings announcement, compared with the Nifty 50 Index which ended 0.2% higher.
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