ITC Ltd Shares Q3 Results

For the Dec-21 quarter, India’s cigarette and FMCG conglomerate, ITC Ltd, reported 31% growth in net sales at Rs.17,108 crore on a YoY consolidated basis. For the Dec-21 quarter, sales of FMCG products were up 9.25% at Rs.4,100 crore while the sales of cigarettes were up 14.3% at Rs.6,959 crore. ITC also declared an interim dividend of Rs.5.25 per share.

Hotel revenues for the Dec-21 quarter doubled YoY to Rs.496 crore while the agri business sales also grew by 91% at Rs.5,157 crore. There was 38% growth in the Paperboard sales at Rs.2,046cr. On a sequential basis, the revenues were up by 24%. During the quarter, ITC acquired 16% of Mother Sparsh Baby Care, a dedicated green baby products company. 

Let us not turn to the operating performance. Operating profits were up 18.22% on a YoY basis at Rs.5,168 crore. On the FMCG side of the business, the higher costs did pose a problem at the input level. During the quarter, the biggest boost to the EBIT undoubtedly came, as usual from the cigarettes business which grew 14.4% at Rs.4,187 crore. The cigarette business constitutes 77% of the overall EBIT of ITC ltd.

FMCG EBIT was flat at Rs.246 crore which is not surprising since the higher cost of inputs dented the operating performance. Agri business reported 17% EBIT growth at Rs.348 crore overall agri EBIT margins disappointed at 6%. Operating margins tapered on the back of higher operating costs from 33.42% in the Dec-20 quarter to around 30.21% in the Dec-21 quarter. On a sequential basis also, the operating margins were lower.

For the December 2021 quarter, the net profits were higher by 15.03% at Rs.4,057 crore. On the positive side, this can be attributed to the operating performance getting transmitted to the bottom line. But the growth is lower than sales due to operating cost pressures. The predominance of cigarettes in the EBIT contribution remains a challenge for ITC and markets would still be wary of looking at valuations favourably beyond a point.

PAT margins for the quarter tapered from 26.96% in the Dec-20 quarter to 23.71% in the Dec-21 quarter due to cost pressures. The PAT margins were also lower on a sequential basis due to input cost stress.