ITC misses Q2 profit estimates amid rising costs, weak consumer demand

ITC Ltd. (ITC.NS), which spans tobacco, hotels, and consumer goods, fell short of second-quarter profit expectations as it faced higher input costs and a slowdown in consumer demand. The company reported a 3 per cent rise in profit to Rs 5,078 crore for the quarter ended Sept. 30, missing the average analyst forecast of Rs 5,114 crore, according to data from LSEG.

ITC, known for its Gold Flake cigarettes, attributed the weaker-than-expected performance to several factors. "Subdued demand conditions, unusually heavy rains in parts of the country, high food inflation, and sharp escalation in certain input costs (were) witnessed during the quarter," the company said in a statement.

Rising Costs and Broader Slowdown

The company’s total expenses surged by 21 per cent during the quarter, driven by higher prices for key raw materials like tobacco leaf, cocoa, and crude oil. The increase in costs, coupled with a broader economic slowdown, has impacted the profitability of consumer goods companies across India.

The consumer goods segment, which accounts for two-thirds of ITC's revenue, grew by 6 per cent but was overshadowed by a stronger performance in the company's hotel and agriculture businesses. Still, overall revenue grew by 16 per cent to Rs 20,537 crore for the quarter.

Despite the revenue increase, ITC’s bottom line was squeezed as urban consumers in India continued to cut back on spending due to inflationary pressures, particularly for essentials like food. This mirrors a broader trend observed across the consumer goods sector, with ITC’s peers such as Nestle India, Hindustan Unilever , and Dabur India reporting downbeat results due to cost pressures and weather-related disruptions.

Shares of ITC dropped nearly 2 per cent ahead of the results announcement, as investors reacted to broader market declines. Year-to-date, ITC’s stock has seen only modest gains, rising by 2 per cent.

(With Reuters inputs.)