ITC Profit Up 21% In Q4 As Cigarette Sales Rise

The company, known for its Gold Flake cigarettes and Bingo chips, reported a net profit of ₹5,086.86 crore for the quarter ended 31 March, up from ₹4,190.96 crore a year ago. The figures topped the ₹4,868 crore predicted in a survey by Bloomberg analysts.

Quarterly operating revenue rose 6.57% from ₹16,426 crore a year ago to ₹17,506 crore. Revenue, too, beat Street estimates of ₹16,721 crore.

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Operating expenses edged up slightly to ₹11,658.05 crore, while operating profit surged 18.9% to ₹6,209.4 crore. Earnings before interest, taxes, depreciation, and amortization (Ebitda) margins expanded 423 basis points from a year ago, but contracted by 49 basis points sequentially to settle at 37.9%.

“Strong cigarette volume growth, softening commodity prices and lower contribution of agri commodity trading business led to an expansion in gross and operating margin during the quarter," said ICICI Securities analysts.

The company’s cigarette business reported volume growth of 11-12% during the quarter; segment revenues grew to ₹7,355.83 crore, up 14.1% from ₹6,443.37 crore a year ago.

The company’s market share was reinforced through a focused portfolio, timely interventions and agile execution, ITC said about its cigarettes business.

ITC’s fast-moving consumer goods arm reported 19.3% jump in revenue in January-March, with categories such as staples, biscuits, snacks, noodles, dairy, beverages, soaps, fragrances, and agarbatti driving growth.

“Margin expansion was driven by interventions, such as premiumization, supply chain agility, judicious pricing actions, digital initiatives, strategic cost management and fiscal incentives (including PLI)," it added. While raw material costs were at elevated levels, some commodities saw sequential price moderation , the firm said in its earnings presentation.

ITC’s revenue for its hotel business, which has grown in the aftermath of the pandemic, doubled to ₹781.71 crore in Q4 FY23.

“ITC continues to witness strong volume growth in cigarette business largely gaining share from contrabands and illicit cigarettes. We believe stable taxation in cigarettes as well as strong traction in high priced cigarettes is leading to high volume growth as well as market share gains. Further, FMCG business margins are improving by 100-150 basis points every year with high growth in the foods business. Softening of commodity prices is likely to help in gaining margins in future as well," ICICI Securities analysts added.

Analysts said ITC is likely to see strong growth in cigarette and FMCG businesses for the medium-term.

For 2022-23, the company’s gross revenue grew 17.6% to ₹69,480.89 crore, while Ebitda was up 26.5% to ₹23,944.47 crore. Profit after tax (PAT) for the full financial year was up 24.5% to ₹18,753.31 crore over the previous year. “After two years of the pandemic-led disruptions, FY23 marked a return to normalcy in operations. However, geopolitical tensions, supply chain dislocations and climate crisis resulted in unprecedented inflation and volatility in global commodity and energy prices," the company said about its full year earnings.

With inflation eating into household budgets, consumption demand especially in rural areas and discretionary spending in urban India was muted. “Consumer centricity, execution excellence and strategic intervention enabled ITC to post strong performance," it added.