ITC of India falls short of profit expectations amidst rising competition and costs
20 Oct 2023
ITC has reported a below-expected rise in profits in its second quarter, as reported on Thursday, 19 October, 2023. The consumers’ goods are facing high competition from smaller companies. This is mainly due to a price drop in some raw materials, such as milk, barley, and tea. Smaller companies are taking advantage of these lower prices to reduce the price of their own commodities and compete with bigger corporations such as ITC and Hindustan Unilever.
"When raw material prices decline, it levels the playing field for both unorganized and organized competitors," noted Shirish Pardeshi, a research analyst at Centrum Broking.
ITC, which contains many household brands such as Aashirvaad, Bingo, and Yippie, stated that its snack, noodle, biscuit, and soap ventures are facing serious competition from regional companies.
Hindustan Unilever, which manufactures Dove soaps, also claimed that it has lost some market share in its mass segment due to lower prices being provided by competition.
However, certain essential commodities such as wheat and sugar are still high, which increased ITC’s total expenses by 3%, amounting to Rs. 120.87 billion for the three months ending on 30 September, 2023.
ITC has diverse business ventures ranging from tobacco to hotels. They still managed to rake in some profits, which rose by 10% to Rs. 49.27 billion, or $592.81 million. These numbers were still below what analysts had estimated. Their estimation stood around Rs. 49.54 billion.
Revenue from operations increased by 3% to reach 177.05 billion rupees, primarily driven by a 10% growth in its cigarette business.
ITC's shares, which had experienced a nearly 2% decline in the September quarter, concluded with a 0.3% decrease in anticipation of the financial results.
Other FMCG giants, such as Nestle India and Hindustan Unilever, exceeded their quarterly earnings projections because urban populations spent more on pick-me-ups like coffee and cookies.
