ITC's Q1 net revenue diminishes to ₹4,912 crore due to strains in non-tobacco FMCG and paper business sectors
In a recent financial update, ITC Ltd, one of India's leading conglomerates, reported its performance for the first quarter of the fiscal year 2026 (FY26). The company registered a "resilient performance" amidst a challenging operating environment.
The cost of materials consumed during the period witnessed a 15.31% year-on-year (y-o-y) increase at ₹6,171.10 crore. The primary reason for this rise was due to both volume growth and price hikes in the materials consumed. Excluding the paper business, ITC Ltd's EBITDA was up by 5% y-o-y in Q1 FY26.
Despite this increase in costs, ITC Ltd's total expenses rose close to 28% y-o-y at ₹15,175.95 crore in Q1 FY26. However, the company's EBITDA grew 2.9% y-o-y at ₹6,261 crore in Q1 FY26.
ITC Ltd's revenue from continuing operations grew close to 20% y-o-y at ₹20,910.95 crore in Q1 FY26. The revenue from ITC Ltd's cigarette business increased by 7.6% y-o-y to ₹8,520.04 crore in Q1. Excluding Notebooks, the non-cigarette FMCG business revenue was up by 8.6% y-o-y in Q1.
ITC Ltd's agri business revenue grew by 38.89% y-o-y to ₹9,685.03 crore in Q1, with the operating profit of the agri business rising by 21.96% y-o-y to ₹433.88 crore in Q1. The operating profit from ITC Ltd's cigarette business increased by 3.74% y-o-y to ₹5,145.28 crore in Q1. ITC Ltd's non-cigarette FMCG business revenue grew by 5.21% y-o-y to ₹5,777.01 crore in Q1, but the operating profit declined by 16.47% y-o-y to ₹397.49 crore in Q1.
Commodity prices, including edible oil, wheat, maida, cocoa, and soap noodles, remain elevated y-o-y, according to ITC Ltd. The Paperboards, Paper & Packaging business of ITC Ltd witnessed a 7.04% y-o-y growth in revenue to ₹2,115.76 crore in Q1, but posted a 37.77% fall in operating profit to ₹162.62 crore during the period.
ITC Ltd posted a marginal y-o-y decline in standalone net profit in Q1 FY26 at ₹4,912.36 crore. However, considering the discontinuing business (Hotels), ITC Ltd's net profit was up by 1.9% y-o-y for the first quarter of FY26.
Notably, the notebooks industry is operating under deflationary conditions due to low-priced paper imports and opportunistic play by local/regional players. ITC Ltd's equity shares of the hospitality major were listed on the NSE and BSE on January 29. The company's hotel business was demerged into ITC Hotels Ltd with effect from January 1, 2025.
In conclusion, ITC Ltd has shown resilience in its performance despite the challenging operating environment and rising costs. The company continues to focus on its core businesses and is working towards improving its profitability in the coming quarters.
- In a challenging operating environment, ITC Ltd's premium subscription-based services, such as its agri business and FMCG products, registeredgrowthinrevenueandoperatingprofit, demonstrating the resilience of the economy and the company's business strategy.
- The company's finance department reported that the total expenses, including the cost of materials and other expenses, increased by nearly 28% year-on-year; however, the EBITDA and revenue from continuing operations saw growth.
- Against the backdrop of a 15.31% year-on-year increase in material costs, ITC Ltd's EBITDA grew by 2.9% year-on-year, highlighting the company's adaptability and resilience within the industry.
- The traditional industry of paper and packaging, namely the Paperboards, Paper & Packaging business of ITC Ltd, witnessed a decline in operating profit due to low-priced paper imports and aggressive pricing strategies from local/regional players.
- In the fiscal year 2026, ITC Ltd's economic performance is influenced not only by import prices and domestic industry competition but also by ITC Ltd's strategic focus on its core businesses and efforts to boost profitability throughout the year.
