Cigarette-to-consumer goods major ITC missed June-quarter earnings on all fronts amid inflationary pressures and a volatile operating environment marked by tax hikes in cigarettes and muted agri-business performance. The Kolkata-based company on Friday reported a 16.2% year-on-year decline in its consolidated net profit (attributable to owners) to Rs 4,394 crore for Q1FY27, below street estimates of Rs 4,852 crore for the period.
Consolidated revenue from operations fell 11.1% year-on-year to Rs 19,114 crore, below Bloomberg consensus estimates of Rs 20,834 crore for the said quarter. The revenue figure is net of excise. Consolidated earnings before interest tax depreciation and amortisation (Ebitda) declined 24% year-on-year to Rs 5,181 crore below street estimates of Rs 5,828 crore for the period. Ebitda margins narrowed 430 basis points to 27.1% in Q1 versus 31.4% reported a year ago.
While the fast-moving consumer goods (FMCG) business delivered a robust performance, with revenue up 12% year-on-year in Q1, the agri business segment was impacted by geopolitical developments and a high base effect, ITC said.
FMCG revenue excluding staples rose 16% during the June quarter, led by an over 20% sales growth in dairy, snacks, noodles and frozen snacks, complemented by mid-teens growth in personal care products and a rebound in sales of notebooks, the company said.
The maker of Aashirvaad atta saw the brand’s performance tempering due to factors including heat waves, LPG shortage, and benign wheat prices in the June quarter.
A sharp cost increase in fuel, edible oil, soap noodles, packaging inputs etc. amid the ongoing West Asia conflict was “cushioned by strategic inventory covers and commodity hedges,” the company said, adding that the ongoing impact is being proactively mitigated through focused cost management initiatives, smart net revenue management and price-volume rebalancing.
Digital Brands Surge
The conglomerate’s digital-first and organic portfolio, comprising brands such as Yogabar, 24 Mantra, Prasuma & Meatigo, and Mother Sparsh, sustained its high-growth trajectory, clocking an annual recurring revenue of approximately Rs 1,500 crore in Q1.
“While consumption demand, both in rural and urban markets, remained resilient during the quarter, imported inflation is a key watch-out in the near-term. India is currently experiencing significant deficit in monsoon and lower Kharif sowing levels compared to the same period last year. Additionally, spatial and temporal variations in monsoon would remain a key monitorable,” the company said.
The company undertook over 30 interventions towards fortifying its cigarette product portfolio to combat the increase in taxes.
“Staggered and agile pricing actions are aiding the business to mitigate the risk of significant migration of volumes to illicit trade while protecting consumer franchise,” the company said.