Q1 Results: ITC’s Profit Meets Estimates, Margins Rise

ITC’s EBITDA margins improved to 39.3% in the June quarter. 

Bingo wafers, made by ITC Ltd., sit for sale at a shop in Mumbai. (Photographer: Adeel Halim/Bloomberg News)
Bingo wafers, made by ITC Ltd., sit for sale at a shop in Mumbai. (Photographer: Adeel Halim/Bloomberg News)

ITC Ltd.'s profit met analyst estimates in the June quarter as margins improved.

Net profit rose 10 percent year-on-year to Rs 2,819 crore, according to the paper-to-cigarettes conglomerate’s exchange filing. That's marginally higher than the Rs 2,800-crore consensus estimate of analysts tracked by Bloomberg.

Revenue rose 7.6 percent to Rs 10,707 crore, compared with the Rs 10,941-crore estimate. Earnings before interest, tax, depreciation, and amortisation rose 12.2 percent to Rs 4,203 crore, while the operating margin rose to 39.3 percent from 37.6 percent. Analysts had expected the margins to come in at 37.2 percent.

The earnings before interest and tax for the cigarettes business grew 9 percent during the quarter to Rs 3,558 crore. Operational performance for the agri-business and paper boards business fell by 17 percent and 15 percent to Rs 194 crore and Rs 296 crore, respectively.

Volume growth for the cigarette business was flattish during the quarter but the fast-moving consumer goods and other segments recorded double-digit growth, according to Tejashwini Kumari, senior research analyst at the financial services advisory IIFL. “We are estimating double-digit growth for the hotels business too.”

Other Highlights

  • Gross margins rose 20 basis points to 61.6 percent
  • Raw material costs as a percentage of revenue rose from 21 percent to 28 percent.
  • Gross margins rose despite higher raw material costs because of lower changes in inventory expenses.

Shares of ITC rose 0.38 percent to Rs 287.15 ahead of the announcement of its results.