ITC Q1 Results: Profit Falls 26% But FMCG Revenue Rises 10.3%

ITC Ltd.’s profit fell in the quarter ended June as the coronavirus outbreak clobbered sales despite some of its products being classified as essentials. Yet, the company’s sales and profit beat a consensus estimate of analysts tracked by Bloomberg.

Net profit of the owner of ‘Aashirvaad’ and ‘Sunfeast’ brands dropped 26% year-on-year to Rs 2,343 crore in April-June period, according to an exchange filing. That compares with the Rs 2,130-crore analysts’ estimate. ITC’s revenue dropped 17.4% year-on-year to Rs 9,501 crore. Analysts had pegged the metric at Rs 8,106 crore.

• Cigarette revenue fell 29.1% year-on-year to Rs 3,853 crore.
• Revenue of the remaining FMCG business rose 10.3% to Rs 3,375crore.
• For the hotels segment, that fall was a huge 94.4% to Rs 22 crore.
• Agri-business revenue rose 3.7% to Rs 3,746 crore.
• Paper-boards segment revenue declined 32.8% to Rs 1,026 crore.

Manufacturing of cigarettes only resumed in mid-May and currently all cigarette making units have scaled up and are operating at pre-Covid levels, ITC said in a statement. While sales and distribution have largely normalised, re-imposition of localised lockdowns in the past few weeks have led to closure of outlets and restrictions to operations in containment zones have posed challenges, it said.

The company said following the virus outbreak, at-home consumption has increased compared to out-of-home consumption. Consumers, it said, are also choosing larger packs as they look to reduce the frequency of purchases.

“Consequently, staples, noodles, biscuits, dairy, sanitisers, handwash, floor cleaners, etc. witnessed robust demand,” ITC said. “On the other hand, discretionary categories and those with relatively higher salience of ‘out-of-home’ consumption witnessed contraction.”

The maker of Savlon antiseptic range of products also said it ramped up capacity in certain categories as concerns on health and hygiene and uncertainty on the duration of lockdowns led to a surge in demand. ITC’s chocolates and confectionery categories were severely impacted due to subdued demand for discretionary products.

In the hotels segment, operations during the quarter came to a standstill as it was limited to services provided to stranded guests and wherever required as quarantine facilities. “With severe restrictions on travel and heightened sensitivity around hygiene and social distancing, revenue streams across all segments of operations have been significantly impacted,” the company said in its statement.

India’s consumer goods makers were battling the worst consumption slowdown in more than a decade even before the pandemic struck. The lockdown stalled economic activity, barring essential services, in April and most of May before the nation started easing curbs.

ITC’s peer Hindustan Unilever Ltd. saw volumes contract 8% in the reported quarter (excluding the acquisition of GlaxosmithKline Consumer Healthcare Ltd.). Britannia Industries Ltd., however, witnessed a twofold jump in its bottom line, aided by sales of its “star-performing brands” such as Marie Gold, Milk Bikis, Nutri Choice and Good Day.

ITC’s operating profit fell 42% year-on-year to Rs 2,646 crore in the three months ended June. Operating margin stood at 27.8% compared with 39.7% a year ago.

Shares of ITC closed 0.4% lower on Friday before the quarterly results were announced. That compares with a 0.2% all in the benchmark Nifty 50 Index.