ITC’s Cigarette Business Recovers from Low Base

ITC reported net revenue of INR12,217 crore in the first quarter of its fiscal year 2022, up 37 percent over the corresponding period of the previous year, reports Money Control. Net profit rose 28.6 percent to INR3,013.5 crore.

Revenue from ITC’s mainstay cigarette segment jumped 33 percent during the first quarter in comparison to INR3,854 crore a year ago.

The growth in topline was led by the company’s cigarette, FMCG and paper segments. The jump came on a low base as the first quarter of fiscal 2021 suffered from a significant decline in sales due to the onset of Covid-19 and a nationwide lockdown.

By contrast, the second wave of the pandemic had limited impact on the segments.

After severe disruptions in May, there has been week-on-week improvement in market conditions from mid-June, according to ITC, with most markets returning to normalcy and witnessing faster recovery compared to the first wave.

“The pace of volume recovery is better, compared to the previous wave of Covid-19, aided by improved mobility, distribution expansion and new launches,” said Mehul Desai, analyst at Anand Rathi Shares and Stock Brokers. “Also, restrictions were not as severe as previous lockdowns.”

ITC introduced several new cigarette variants, including Gold Flake Excel, Wills Navy Cut Filter and Berkeley Hero, during the quarter.

The FMCG category, which includes several essential products, has helped the company tide over a difficult year. Its revenue from the segment stood at INR3,726 crore during the quarter as compared to INR3,375 crore in the year-ago period.

Despite continued growth in FMCG, ITC continues to draw the highest share of its revenue from cigarettes, a matter of concern for analysts.