ITC Q1 PAT rises 29% YoY to Rs 3,013 cr

ITC reported 28.6% rise in standalone net profit to Rs 3,013.49 crore on a 37.3% rise in net sales to Rs 12,142.43 crore in Q1 FY22 over Q1 FY21.

As compared to Q4 FY21, the company's net profit and net sales are lower by 19.6% and 7.7%, respectively.

Profit before tax in Q1 FY22 stood at Rs 4,015.35 crore, up by 28.4% from Rs 3,128.43 crore in Q1 FY21. The company's current tax outgo increased by 29.4% YoY to Rs 993.46 crore during the quarter.

Total FMCG segment revenue increased by 22.4% YoY to Rs 8,848 crore during the period under review. In the FMCG segment, cigarettes revenue rose by 32.9% YoY to Rs 5,122 crore while the revenue from other FMCG segment improved by 10.4% YoY to Rs 3,726 crore during the quarter.

Hotel business revenue stood at Rs 127 crore (up 4.6x YoY), agri-business revenue was at Rs 4,091 crore (up 9.2% YoY) and paperboards, paper & packaging revenues were at Rs 1,583 crore (up 54.2% YoY) in the first quarter of FY22.

ITC said that localised lockdowns and mobility restrictions imposed by States in a bid to contain the sharp increase in daily COVID-19 infections in the second wave rendered the operating environment during the quarter extremely challenging and impacted the strong recovery momentum witnessed in recent quarters. The situation continues to improve with the progressive easing of restrictions and increased mobility from mid-June'21.

With regard to the FMCG - Others business, the company said that both urban & rural growth rates in the FMCG Industry moderated in the immediate aftermath of the sharp rise in new cases; however there has been a progressive rebound since June'21 with the easing of restrictions and increase in mobility.

Heightened concerns on hygiene and safety continued to manifest in consumers' preference for trusted brands. Savlon range of Hygiene products bounced back after normalizing at elevated levels in H2 FY21 to deliver a robust y-o-y and q-o-q growth.

Discretionary/'out-of-home' consumption products witnessed strong growth on a favourable base; second wave impacted sequential performance although the order of magnitude was relatively lower compared to first wave. Unlike in the first wave where there was a significant surge in demand for Staples and Convenience Foods, the current quarter witnessed a relatively mild uptick in these categories; High base effect in Staples and Convenience Foods led to moderation in y-o-y growth rates.

With regard to the FMCG - Cigarettes business, the company said that the strong volume recovery momentum witnessed in the second half of FY21 was impacted by localised lockdowns and restricted hours of convenience store operations in the wake of second wave of the pandemic. Product accessibility was sustained despite market disruptions leveraging the Company's multi-channel distribution network comprising traditional channels, convenience outlets and stockists network. Certain markets in the South, metro cities and towns were relatively more impacted

Wide availability of smuggled cigarettes continues despite deterrent actions by concerned authorities; this remains a key challenge for the legal cigarette industry which has witnessed significant reduction in volumes in recent years. The Business continues to proactively engage with policy makers on the criticality of stability in taxation to curb the proliferation of illicit cigarettes due to high taxation on legal cigarettes, ITC added.

The second wave of the pandemic triggered a fresh round of mobility and travel restrictions leading to severe disruptions, impacting the progressive recovery witnessed in H2 of FY21 in the Hotels business. With reduction in new COVID infections and easing of travel restrictions in June'21, domestic leisure segment witnessed an uptick. Focused and curated packages were deployed to garner business. Aggressive cost reduction measures continued to be deployed to mitigate the impact of negative operating leverage.

In the Agri Business, the company recorded strong growth in Wheat, Rice & Leaf Tobacco exports and Soya in the domestic market. The business responded with agility to combat significant operating challenges during the quarter due to pandemic-induced closure/restrictions in operations at mandis and auction platforms by leveraging multiple sourcing models and multi-modal transportation network.

The business remains focused on its strategy to rapidly scale up its value-added product portfolio to accelerate growth and enhance value capture. Export of high-quality spices to Food Safe markets continued to gain strong traction. In addition, the Company's wholly owned subsidiary, ITC Indivision Limited, is setting up a state-of-the-art facility to manufacture and export Nicotine & Nicotine derivative products. The facility is being geared to manufacture purest nicotine conforming to US and EU pharmacopoeia standards. The project is progressing as per schedule.

In the Paperboards and Specialty Papers Business, domestic customer offtake saw positive trends in most key segments such as pharma and consumer goods. However, certain end-user segments such as publications, cupstock, On-the-Go liquid packaging and wedding cards continued to be impacted by the pandemic-related disruptions.

Significant improvement in margins was driven by increase in realisations (especially in VAP and Specialty Papers), structural investments to enhance competitiveness including in-house pulp manufacturing capacity expansion and sharper focus on operational efficiency leveraging data analytics and Industry 4.0.

ITC is engaged in the marketing of fast-moving consumer goods (FMGC). The firm operates through four segments: FMCG; hotels; paperboards, paper and packaging, and agri business. ITC is the market leader in cigarettes in India. The company also has presence in branded packaged foods, personal care, education and stationery, agarbattis & safety matches, lifestyle retailing, hotels, paperboards & specialty papers, packaging, agri-business & IT.

The scrip rose 0.82% to currently trade at Rs 214.10 on the BSE.

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