ITC profit tumbles as cigarette volumes fall due to higher prices

Consumer major ITC Ltd reported an 18.6 percent fall in consolidated net profit to Rs 5,126 crore in the September quarter (Q2FY27) from Rs 4,394 crore in the year-ago period. The company's revenue from operations rose 44 percent to Rs 30,578 crore from Rs 21,256 crore in the same period last year. Cigarette volumes remained under pressure during the quarter, due to an "unprecedented increase in tax," the company stated in a release. On an operating level, EBITDA (earnings before interest, tax, depreciation and amortisation) declined 17.4 percent to Rs 5,160 crore from Rs 6,250 crore in the year-ago period, while EBITDA margins contracted to 28 percent from 34.6 percent.

FMCG growth ITC said its non-cigarette businesses recorded robust growth, with consolidated revenue rising 19 percent year-on-year, marking the fourth consecutive quarter of double-digit revenue growth. Biscuits, snacks, noodles, spices, salt, frozen snacks, homecare and notebooks led with over 20 percent growth, supplemented by high-teens growth in dairy and personal wash. "The operating environment continued to be characterised by heightened uncertainty amidst renewed geopolitical tensions and trade disruptions. Crude oil and crude-linked input prices remained elevated, while supply chain disruptions and higher freight costs persisted," the company said in a release.

"Global inflationary pressures intensified, driven by higher energy and food prices, alongside elevated sovereign bond yields and tighter financial conditions, while in India headline inflation moved up, driven by a broad-based increase across food, fuel and core components," it added. The company managed this sharp input cost escalation across categories "through portfolio mix enrichment, cost management initiatives and calibrated pricing actions," it stated. Meanwhile, its digital-first and organic portfolios, comprising brands such as Yogabar, 24 Mantra, Prasuma & Meatigo, and Mother Sparsh, continued their growth trajectory, rising more than 70 percent year-on-year, with annual recurring revenue crossing Rs 1,800 crore.

Cigarettes business under pressure The company said that it introduced new variants and own trademarks with international appeal as part of efforts to strengthen its portfolio and compete with globally smuggled brands. The company also flagged a sharp increase in seizures of smuggled cigarette consignments, pointing to the growing exploitation of tax arbitrage in the market. Agri business The conglomerate's agri business reported a 12 percent revenue growth, led by value-added products and leaf tobacco exports, although West Asia-related trade disruptions and delayed customer call-offs continued to affect the segment.

However, lower domestic demand due to an unprecedented tax increase on cigarettes continues to affect the overall leaf tobacco business, it added. Paper biz The paper segment recorded a stronger recovery, with revenue rising 36 percent year-on-year and segment profit before interest and tax (PBIT) increasing 48 percent, helped by improving demand and pricing action.