ITC net profit falls 26% at Rs 2,342 crore in Q1

The company said following the outbreak of the pandemic, there was heightened awareness of quality products anchored on vectors of health, wellness and immunity.

ITC on Friday reported over 26% year-on-year fall in its standalone net profit to Rs 2,342.76 crore for the first quarter ended June 30, as the diversified conglomerate’s gross revenue from sale witnessed close to 17% year-on-year decrease amid the coronavirus crisis. The cigarette-to-FMCG-to-hotel major had posted Rs 3,173.94 crore net profit for the first quarter of the last financial year.  During the June quarter this fiscal, its gross revenue from sales stood at Rs 9,435.61 crore as against Rs 11,361.35 crore in the same period last fiscal.

The company, in a statement, said unprecedented disruptions in economic activity caused by nationwide lockdowns in the wake of Covid-19 pandemic weighed on its performance during the April-June period. During the first quarter this fiscal, revenue from the company’s cigarette business decreased by 29% y-o-y at Rs 3,853.79 crore, while operating profit from the segment fell 38.78% y-o-y at Rs 2,356.38 crore during the period.

During the quarter under review, its non-cigarette FMCG business, however, registered 10.3% y-o-y growth in its revenue to Rs 3,374.57 crore, while the segment posted a 60.74% y-o-y growth in operating profit at Rs 125.41 crore during this period, according to a stock exchange filing.

The company, in its statement, said non-cigarette FMCG business’ Ebitda was up by 42.4% to Rs 257 crore notwithstanding incremental costs due to Covid-19, gestation and start-up costs of new categories/facilities.
This segment’s Ebitda margin grew 170 basis points.

The non-cigarette business includes branded packaged foods, education and stationery products, personal care products, safety matches and agarbattis, and apparel. On the performance of its non-cigarette FMCG business, ITC said, “The onset of Covid-19 pandemic and the consequent lockdowns to curb its spread caused severe disruption in manufacturing, supply chain, and sales & distribution operations. Amidst such challenging circumstances, the company was amongst the fastest off the blocks to resume operations after obtaining necessary permissions in the lockdown phase, with safety and employee well-being accorded paramount importance.”

The company said following the outbreak of the pandemic, there was heightened awareness of quality products anchored on vectors of health, wellness and immunity, and there was 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 frequency of purchase. Heightened concerns on hygiene and safety are also manifesting in consumers’ preference for trusted brands. Consequently, staples, noodles, biscuits, dairy, sanitizers, hand wash, floor cleaners, etc. witnessed robust demand. On the other hand, discretionary categories and those with relatively higher salience of ‘out-of-home’ consumption witnessed contraction,” it said.

The company’s revenue from its hotels business decreased by a whopping 94.2% y-o-y at Rs 22.58 crore, while the segment posted an operating loss of Rs 242.58 crore during the period against an operating profit of Rs 10.39 crore during the corresponding period last fiscal. The company said hotels segment severely impacted with operations coming to a standstill due to restrictions on travel and hotel operations. “Negative operating leverage weighed on segment profits; aggressive reduction in controllable fixed costs partly mitigated the impact,” it added.
On Friday, ITC’s scrip fell 0.47% to end the day at Rs 199.70 on the Bombay Stock Exchange. The company declared the quarterly results after normal trading hours.