ITC Q1 Results: Leaf tobacco inflation may impact margins; volume growth in focus

FMCG major ITC Ltd. will be reporting their results for the June quarter on Friday, August 1, where the margins are likely to see an impact compared to the same quarter last year.

It has to be noted that the numbers would not be comparable in percentage terms as the base quarter involved the demerger of the hotels business.

According to a CNBC-TV18 poll, ITC’s margins are likely to be at 35.8% from 37% last year, as the higher prices of leaf tobacco, a key input substance, would have an impact.
Revenue for the quarter is seen at ₹17,637 crore, according to the poll, compared to ₹17,000 crore last year, while Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) is likely to be at ₹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 for the cigarette business is likely to be between 5% and 6%, while growth in its Earnings Before Interest and Tax (EBIT) is seen growing between 3% to 4%.

ITC’s FMCG business is likely to see revenue growth between 5% and 6%, while margins are likely to expand by 150 to 200 basis points. Similarly, the agri business may see growth between 20% to 25% with expanding margins.

However, subdued business conditions could keep ITC’s revenue growth in the paper business to be between 4% and 6% during the quarter.

Shares of ITC are off the highs of the day, but are trading with gains of 0.9% at ₹415.65. The stock is still down 14% on a year-to-date basis.