India's FMCG major ITC on July 24 reported a 26 percent year-on-year fall in standalone net profit for the quarter ended June 30, 2020, at Rs 2,342.76 crore.
There is a rising trend of ‘at-home’ as opposed to ‘out-of-home’ consumption. Apart from a thrift mindset, consumers are also preferring larger pack formats as they seek to reduce the frequency of purchase.
“Heightened concerns on hygiene and safety are manifesting in consumers’ preference for trusted brands. Consequently, staples, noodles, biscuits, dairy, sanitisers, hand wash and floor cleaners witnessed robust demand. On the other hand, discretionary categories and those with relatively higher salience of ‘out-of-home’ consumption witnessed contraction,” said ITC in a press release
Unprecedented disruptions in economic activity caused by nationwide lockdowns in the wake of COVID-19 pandemic weighed on the ITC’s performance in the first quarter of FY21.
Hotels, Cigarettes, ESPB and Paperboards and Packaging Businesses were impacted the most.
India's FMCG major ITC on July 24 reported a 26 percent year-on-year (YoY) fall in standalone net profit for the quarter ended June 30, 2020, at Rs 2,342.76 crore.
The company had reported a net profit of Rs 3,173.94 in the same quarter a year ago.
The numbers came better than the estimates of the market. A CNBC-TV18 poll had estimated the June quarter net profit at Rs 2,220 crore.
ITC’s revenue from operations dropped 17.4 percent YoY to Rs 9,501.75 crore in Q1FY21 from Rs 11,502.82 crore in the corresponding quarter a year ago. A CNBC-TV18 poll had estimated the June quarter revenue at Rs 8,650 crore.
Revenue from cigarettes stood at Rs 3,853.79 crore in Q1FY21, down 29 percent against Rs 5,433.40 crore reported in Q1FY20. Cigarettes EBIT fell 38.8 percent to Rs 2,356.4 crore against Rs 3,849.1 crore YoY.
Negative operating leverage and adverse business mix weighed on profits, which was partially mitigated through an extreme focus on cost reduction.
“The recent imposition of localised lockdowns in several parts of the country, however, are posing operational challenges and impacting the recovery momentum. The company shall continue to closely monitor the situation and respond with agility to strengthen its market standing while sharply focusing on cost reduction measures,” it said in the press release.
The Branded Packaged Foods Businesses delivered a robust performance during the quarter driven by Atta, Noodles, Biscuits and Fresh Dairy. Most major categories gained market share during the quarter.
In the Staples, Snacks and Meals category, ‘Aashirvaad’ atta posted strong growth across markets. The brand further fortified its leadership position in the branded packaged atta industry during the quarter with significant value and volume growth. ‘Yippee!’ Noodles posted substantial growth driven by increased ‘at-home’ consumption and leveraging high-decibel brand campaigns.
The ‘Bingo!’ Snacks category, which saw subdued operational performance during the initial phase of the lockdown due to restricted mobility, rapidly normalised after the restrictions of complete lockdown were lifted.
Sunfeast’ Biscuits and Cakes recorded robust growth driven mainly by a surge in ‘at home’ consumption and the consumers’ preference for trusted brands. Veda Marie, launched last year, continued to record impressive growth in all target markets.
In the Dairy and Beverages category, ‘Aashirvaad Svasti’ range of fresh dairy products and ghee recorded strong growth. The range of milk products was augmented with the launch of Aashirvaad Svasti Lassi, which has received encouraging consumer response.
The 'B Natural' range of juices anchored on the ‘goodness of fibre’ proposition was augmented with the launch of two innovative variants addressing immunity needs in partnership with Amway. The immunity range has met with encouraging response from discerning consumers.
The Chocolates and Confectionery categories were severely impacted reflecting the subdued demand for discretionary products; these categories are witnessing progressive normalisation as the lockdowns are being eased across the country.
The Personal Care Products Business recorded substantial growth in revenue driven by heightened awareness and demand for hygiene products such as hand sanitisers, handwash, antiseptic liquids and floor cleaners in the wake of the COVID-19 pandemic. However, the ‘Engage’ range of fragrancing products witnessed a tepid quarter due to a significant decline in demand.