ITC Net Income Up 38.35% in June Quarter; beats the street estimates

NEW DELHI : ITC Ltd, exceeded Street expectations on Monday with a 38.35% rise in standalone net profit for the June quarter. Earnings in the three months ended June 30 climbed to 4,169.38 crores of 3,013.49 crores a year earlier.

Operating revenue increased by 41.3% for 18,320.16 crores of 12,959.15 crores a year ago.

The profit exceeded the 3,949 crores estimated in a Bloomberg survey of 38 analysts. Revenues also exceeded Street’s estimates of 15,094 crores.

“Economic activity accelerated further in the quarter with rising business and consumer sentiment. However, geopolitical tensions and ongoing supply chain disruptions have caused commodity prices to tighten, exacerbating the unprecedented inflationary conditions prevailing in the economy. Inflationary headwinds have also manifested themselves in subdued consumer spending with volumes under pressure, particularly in rural markets,” the company said in a statement on Monday.

Against this backdrop, ITC focused on digital adoption, customer centricity, execution and agility, which enabled it to deliver strong performance across all operating segments during the quarter, both sequentially and year over year, he added.

However, while the path of inflation remains a key controllable element, the prospects of a favorable monsoon and the recent moderation in major commodity prices, together with the proactive interventions of the government and the Reserve Bank of India ( RBI) bode well for a sustained economic recovery and a pickup in consumer spending, the ITC said.

Bingo chip and cigarette maker Gold Flake said spending in the March quarter rose 39.6% from a year ago to reach 13,093.30 crores while earnings before interest, taxes, depreciation and amortization (Ebitda) stood at 5,646 crore.

ITC beat Street estimates across all segments with a strong performance, analysts said. Sales growth in the current quarter represents a full recovery across all segments of the company, ICICI Securities analysts said. “ITC’s results in the first quarter of FY23 exceeded our estimates in terms of revenue, operating profit and profit. Revenue growth was supported by strong growth in cigarettes, agribusiness, paperboard and FMCG,” they added.

“On a three-year CAGR (compound annual growth rate) basis, the cigarettes, food, paperboard, consumer packaged goods and hotels businesses recorded sales growth of 6.7%, 27.4%, 14, 1%, 13.3% and 12.2%, respectively Given that there has been no major intervention in cigarette prices over the past year, we believe volume growth would be closer to 25% with some product mix improvement,” ICICI Securities said.

Overall, gross margins declined by 162 basis points, largely due to the higher contribution from agricultural sales in the quarter, in addition to strong commodity inflation in the core commodities of the business FMCG, analysts said. 4,451.39 crores, while cigarette revenue increased by 29% to reach 6,608.98 crores.

ITC saw strong growth in discretionary and out-of-home categories; sales of staples and convenience foods, driven by brands such as Sunfeast Cookies, Sunrise Spices, Aashirvaad Salt and Aashirvaad Svasti Dairy. Its education and stationery products business rebounded as educational institutions reopened. Although sales of ITC’s hygiene portfolio were subdued, they were above pre-pandemic levels.

“The segment’s EBITDA margins held up despite unprecedented commodity inflation; steep escalation in input costs mitigated by strategic multi-pronged interventions,” he added.

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