ITC Q1 net profit tanks 26% to Rs 2,342.76 crore from previous year's 3173.94 crore

Profit After Tax and Total Comprehensive income in Q1 stood at Rs. 2342.76 crores (previous year Rs.3173.94 crores) and Rs.2337.03 crores (previous year Rs. 2960.93 crores) respectively. Earnings Per Share for the quarter was Rs. 1.91 (previous year Rs. 2.59).

Presenting its Standalone Financial Results for the Quarter ended 30th June, 2020, the company said Hotels, Cigarettes, ESPB and Paperboards & Packaging Businesses were impacted the most.

FMCG-Others Segment delivered a strong performance driven by Staples, Convenience Foods and Health & Hygiene products, leveraging the strong equity of the Company’s brands and a robust portfolio of relevant and innovative products.

Negative operating leverage and adverse business mix weighed on profits which was partially mitigated through extreme focus on cost reduction. Expenses for the quarter include incremental spends of Rs. 92 crores on CSR initiatives which were directed mainly towards combating the COVID-19 pandemic.

Other than the Hotels segment, progressive normalisation was witnessed in the later part of the first quarter across all operating segments. The recent imposition of localized lockdowns in several parts of the country, however, are posing operational challenges and impacting the recovery momentum.

The Company said it shall continue to closely monitor the situation and respond with agility to strengthen its market standing while sharply focusing on cost reduction measures.

FMCG-Others

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.

Segment Revenue grew 12.2% on a comparable basis (excl. Lifestyle Retailing). Excluding the Education and Stationery Products Business, which was impacted by the closure of educational institutions in the wake of the pandemic, Segment Revenue grew by 18.8%. Segment EBITDA grew by 42% to 257 cr., with margins expanding by 170 bps y-o-y, notwithstanding the gestation costs of new categories/facilities and the incremental operating costs due to the COVID-19 pandemic. 

Following the outbreak of the pandemic, there is heightened awareness of quality products anchored on vectors of health, wellness and immunity.

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 frequency of purchase, ITC said. 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. The Businesses significantly ramped up capacity in certain categories as heightened concerns on health & hygiene and uncertainty on the duration of lockdowns led to a surge in demand.

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 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 & 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 sanitizers, handwash, antiseptic liquids and floor cleaners in the wake of COVID-19 pandemic. However, the ‘Engage’ range of fragrancing products witnessed a tepid quarter due to significant decline in demand.

(Image: ITC Royal Bengal Hotel in Kolkata)