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ITC Ltd., a diversified Indian conglomerate, announced its financial results for the third quarter (Q3) ended December 31, 2024, revealing a mixed performance. While the company's consolidated net profit experienced a 7% year-on-year (YoY) decline, falling to Rs 4,935 crore compared to Rs 5,335 crore in the same period the previous year, its revenue demonstrated robust growth, increasing by 8% YoY to reach Rs 20,350 crore. This performance underscores the complex interplay of factors impacting the company's diverse business segments amidst a challenging economic environment. The board's recommendation of an interim dividend of Rs 6.5 per share for the fiscal year ending March 2025 further indicates a commitment to shareholder returns despite the dip in profitability.
A deeper analysis of ITC's segment-wise performance reveals a story of contrasting fortunes. The cigarette business, a cornerstone of ITC's operations, showed resilience, achieving an 8% YoY revenue growth. Profit before tax (PBT) for this segment rose by 4% YoY, a testament to the company's strategic interventions aimed at countering illicit trade and driving volume growth. However, the segment faced challenges due to sharp cost escalations in leaf tobacco. ITC mitigated these pressures through strategic pricing adjustments, improved product mix, and focused cost management initiatives. Furthermore, the restructuring of trade marketing spending aimed to optimize last-mile execution and maximize efficiency.
In stark contrast to the relatively moderate performance of the cigarette business, the hotels segment delivered exceptional results. Revenue surged by 15% YoY to Rs 922 crore, demonstrating strong demand even against a high base from the previous year. The profit before tax for this segment witnessed a remarkable 43% YoY increase, reaching Rs 302 crore. This exceptional performance is attributed to a significant expansion of EBITDA margins by 450 basis points, a result of higher revenue per available room (RevPAR), operating leverage, and strategic cost management. The demerger of the hotels business into ITC Hotels, effective January 1, 2025, marks a significant restructuring within the ITC conglomerate.
The FMCG (Fast-Moving Consumer Goods) businesses demonstrated a decent performance despite muted demand conditions. Segment revenue grew by 4% YoY, reaching Rs 5,418 crore, driven by strong performance in key product categories such as atta, spices, snacks, frozen snacks, dairy, premium personal wash, homecare, and Agarbatti. However, the segment faced significant inflationary pressures affecting key inputs, including edible oils, wheat, maida, potato, and cocoa. ITC countered these challenges through focused cost management, calibrated pricing actions, and a strategy of premiumization. The company also maintained competitive marketing investments to support growth and market position despite short-term inflationary pressures.
The paperboards and packaging business operated within a challenging operating environment marked by low-priced competition from Chinese and Indonesian suppliers. Soft domestic demand, an unprecedented surge in domestic wood costs, and subdued realizations all weighed heavily on this segment's performance. Despite these headwinds, the segment managed to achieve a 3% YoY revenue growth, primarily driven by strong export performance. ITC emphasized its continued focus on portfolio augmentation, export market development, and structural cost management to mitigate near-term challenges. The substantial increase in domestic wood costs, further aggravated by cyclonic rainfall in core plantation areas and increased demand from other wood-based industries, presents a persistent challenge for this segment.
The agri-business segment showcased positive growth, with revenue increasing by 10% YoY, primarily driven by leaf tobacco and value-added agri exports. Profit before interest and tax (PBIT) experienced a significant 22% YoY increase during the reporting period. The value-added agri portfolio, particularly coffee exports, recorded robust growth. ITC leveraged its advanced value-added spices processing facility in Guntur to enhance its export capabilities and scale up operations. This highlights the company's commitment to leveraging its agricultural expertise for growth in both domestic and international markets.
In conclusion, ITC's Q3 results present a complex picture of both growth and challenges. While some segments, notably hotels and agri-business, displayed exceptional performance, other segments like paperboards struggled with external factors. The overall decline in net profit underscores the ongoing impact of inflationary pressures and fluctuating market conditions. The company’s proactive strategies in areas such as cost management, pricing, and portfolio diversification indicate a focus on navigating these challenges and maintaining a competitive position within its diverse business landscape. The market reacted negatively to the results, with ITC shares closing 1.2% lower at Rs 442.75 on the NSE on Thursday. Further analysis will be needed to fully assess the long-term implications of these results for ITC's overall strategic direction.
Source: ITC Q3 Results: Cons PAT falls 7% YoY to Rs 4,935 cr but revenue rises 8%