Overview of Q4 FY24 Results

ITC Ltd, one of India’s leading Fast-Moving Consumer Goods (FMCG) companies, reported flat financial results for the fourth quarter of the financial year 2024. Despite a modest 1.3% decline in standalone net profit to ₹5,020.20 crore, the company remains optimistic about the future, especially regarding rural demand recovery.

Rural Demand Recovery

Market researcher Nielsen IQ (NIQ) recently highlighted that rural markets outpaced urban markets for the first time in 15 months. ITC Ltd echoed this positive sentiment in its earnings statement, anticipating a revival in rural consumption demand. The company pointed to improving macro-economic indicators, the prospects of a normal monsoon, and early signs of rural demand recovery as key factors for optimism.

Revenue and Profit Margins

For the quarter ending March 2024, ITC’s revenue from operations grew 1.4% to ₹17,752.87 crore, exceeding Street estimates of ₹17,191 crore. However, the net profit fell short of Bloomberg’s poll of 20 analysts, which had estimated ₹5,150 crore. The company attributed the dip in profit to subdued consumption demand during the quarter.

ITC faced challenges in its agriculture, paperboards, and packaging segments, which saw revenue declines. Additionally, the company’s expenses rose by 2.4% to ₹12,017.71 crore year-on-year during the January-March period.

Performance Across Segments

FMCG (Excluding Cigarettes)

The FMCG segment, excluding cigarettes, showed a robust performance with a 7.1% revenue increase to ₹5,300.17 crore in Q4, driven by staples, biscuits, snacks, dairy, homecare, and incense sticks. For the full year, this business grew 9.6% year-on-year to ₹20,966.83 crore. Despite high competitive intensity from local and regional players, the segment maintained its growth trajectory.

Cigarettes

The cigarettes segment reported a 7% rise in revenue to ₹7,924.84 crore, surpassing Street expectations. The segment’s profit before interest and tax (PBIT) increased by 5% year-on-year, demonstrating resilience amidst sharp cost escalation in leaf tobacco and other inputs. ITC managed to mitigate these costs through improved product mix, strategic cost management, and calibrated pricing.

Agriculture Business

ITC’s agriculture business faced a 13.3% year-on-year decline in revenue to ₹3,101 crore during the March quarter. The company cited the challenging operating environment, influenced by government policy interventions to ensure food security and control inflation. Trade restrictions on agricultural commodities and steep increases in green leaf prices also pressured margins. Despite these challenges, the strategic portfolio of value-added agri products and leaf tobacco revenues grew by 18% year-on-year in Q4.

Strategic Initiatives and Outlook

ITC continues to focus on consumer centricity, purposeful innovation, agility, and execution excellence. These strategies are designed to navigate short-term challenges and create sustained value for stakeholders. The company’s confidence is bolstered by the improving economic indicators and expected rural demand recovery.

Dividend and Share Performance

The ITC board recommended a final dividend of ₹7.50 per share. ITC shares closed at ₹441.20 each on the NSE, marking a 0.33% increase. The earnings per share for the year stood at ₹16.39, up from ₹15.15 in the previous year.

Demerger of ITC Hotels Ltd

In a significant move, the National Company Law Tribunal (NCLT) has directed a meeting of shareholders on 6 June 2024 to consider and approve the demerger of ITC Hotels Ltd from ITC Ltd. This strategic step is expected to unlock value and streamline operations.

Conclusion

Despite a challenging fourth quarter, ITC Ltd’s anticipation of rural demand recovery and strategic focus areas paint a promising picture for the future. With its comprehensive approach to navigating market dynamics and fostering innovation, ITC is well-positioned to capitalize on emerging opportunities and sustain growth.

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Disclaimer:

The information presented in this article has been compiled from multiple sources across the internet. It is intended for informational purposes only and should not be construed as investment advice. Any investment decisions should be made in consultation with a reputable financial advisor. The author and publisher of this article are not liable for any losses incurred by investors or traders as a result of the information provided.