ITC Q2 Profit Rises 4% Amid Challenges in FMCG and Paper Businesses

Diversified conglomerate ITC Limited announced its second-quarter financial results for fiscal year 2025, posting a standalone net profit of ₹5,179.82 crore, a modest 4.09% increase year-on-year. This growth was achieved despite a 2.4% dip in total revenue from operations, which stood at ₹19,381.99 crore, largely influenced by a significant 31.21% decline in its agri business revenue.

The company highlighted operational challenges impacting its businesses. Excessive rains and the transition to a new Goods and Services Tax (GST) regime led to short-term business disruptions. The paperboards, paper, and packaging segment saw revenue grow by 5% to ₹2,219.92 crore, but its operating profit declined by 21.22%, attributed to low-priced paper imports and industry-wide issues like high wood prices and subdued realization.

ITC's core cigarette business continued its strong performance, with revenue rising 6.67% to ₹8,722.83 crore and operating profit increasing by 4.32%. The non-cigarette FMCG business also posted revenue growth of 6.93%, reaching ₹5,964.44 crore. However, this segment experienced a marginal 0.32% drop in operating profit, partly due to passing on GST benefits to consumers on over 50% of its FMCG portfolio.

Excluding the agri business, ITC's gross revenue grew by 7.1% year-on-year. The company's EBITDA saw a 2.1% increase to ₹6,252 crore. Notably, the hotel business has been demerged into ITC Hotels, effective from January 1, 2025, meaning its results will not be consolidated from that point onwards.

Impact: This news is important for investors as it provides an update on ITC's performance across its diverse business segments. While the profit growth is positive, the revenue decline and margin pressures in specific segments like agri business and paper require investor attention. The demerger of the hotel business also signifies a strategic shift for the company. The stock may react to the performance of its core cigarette business versus the challenges faced by newer growth areas. Rating: 7/10

Difficult Terms: Standalone Net Profit: The profit generated by a company from its own operations, excluding profits from subsidiaries or joint ventures. FMCG (Fast-Moving Consumer Goods): Products that are sold quickly and at a relatively low cost, such as packaged foods, toiletries, and beverages. Agri Business: Operations related to agriculture, including trading in agricultural commodities. Paperboards, Paper & Packaging: Business segment involved in the manufacturing of paper, paperboards, and packaging materials. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): A measure of a company's operating performance. Demerged: The separation of a part of a company into a new, independent company. GST (Goods and Services Tax): A consumption tax imposed on the supply of goods and services. Low-priced paper imports: Paper products entering the country at a lower cost than domestically produced ones, impacting local manufacturers. Subdued realization: Lower than expected prices achieved for products in the market.