ITC Q1 Results: Strong sales growth marred by pressure on margins

FMCG major ITC Ltd. reported its results for the June quarter on Friday, August 1, where the margins witnessed impact compared to the same quarter last year.

EBITDA margin for the quarter stood at 31.7% from 37% during the same quarter last year. According to a CNBC-TV18 poll, ITC's margins were likely to be at 35.8%. Analysts had projected the higher prices of leaf tobacco, a key input substance, to have an impact on margins.

Excluding the excise duty, ITC reported a 21.6% growth in its revenue for the quarter gone by to ₹19,750 crore. Analysts had projected the figure to be at ₹17,637 crore.

Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) for the quarter increased by 5.2% on a year-on-year basis to ₹6,261 crore, which is marginally lower than the CNBC-TV18 poll of ₹6,315 crore.

Analysts believe that ITC's cigarette business is likely to see volume growth between 3% to 4%, which is lower than the growth seen over the last two quarters.

Revenue growth for the cigarette business stood at 7.6% from the same quarter last year to ₹8,520 crore. Analysts were projecting the revenue growth to be between 5% and 6%.

ITC's FMCG business saw a 5.2% revenue growth from last year to ₹5,777 crore, in-line with the analyst expectations to be between 5% and 6%.

The agri business outperformed during the quarter, with revenue increasing 39% on a year-on-year basis to ₹9,685 crore, much higher than the CNBC-TV18 poll projection of growth to be between 20% and 25%.

Despite subdued business conditions, ITC's paper business saw growth of 7% from last year to ₹2,115 crore. Analysts were projecting the growth to be between 4% to 6%.

Shares of ITC are had ended 1.1% higher on Friday at ₹416.65, ahead of the earnings announcement. The stock is still down 14% on a year-to-date basis.