ITC Q2 FY27 Result: Net profit drops 20% YoY; cigarette business sees growth sequentially

The country’s leading fast-moving consumer goods (FMCG) company’s total revenue from operations, however, increased 28% year-on-year (YoY) to ₹28,318 crore during the quarter under review in contrast to ₹19,442 crore in the year-ago period.

ITC’s earnings before interest, taxes, depreciation, and amortisation (EBITDA) dropped 17% to ₹5,160 crore in Q2 FY27 as against ₹6,251 crore in the corresponding quarter of the previous fiscal year.

For Q2 FY27, the EBITDA margin contracted to 18.22% as against 31.15% YoY.

For the cigarettes business, focused execution of strategic and calibrated responses to navigate the unprecedented tax increase, balancing the interests of all stakeholders and improvement in QoQ performance, ITC said.

Segment updates

The company said its FMCG segment sustained strong double-digit growth, with biscuits, snacks, noodles, spices, salt, frozen snacks, homecare and notebooks recording growth of over 20%.

Dairy and personal wash products posted high teens' growth. The segment’s EBITDA margin expanded by over 50 basis points both annually and sequentially, while higher input costs were mitigated through a better portfolio mix, cost management initiatives and calibrated pricing actions.

ITC’s digital-first and organic portfolio continued to report strong growth, with revenue rising over 70% YoY. The portfolio’s annual recurring revenue (ARR) stood at over ₹1,800 crore.

Further, the legal industry volumes in its cigarettes business remained under pressure due to an unprecedented increase in taxes, ITC said. The company adopted a calibrated response to mitigate the risk of a disproportionate shift in volumes to illicit trade and protect its consumer base.

The firm also implemented multiple measures to strengthen its product portfolio and market position and counter global smuggled brands. These included introducing new variants and its own trademarks with international appeal.

The agri business segment reported 12% YoY revenue growth, led by value-added products and leaf tobacco exports. ITC said the overall segment continued to be affected by disruptions caused by the West Asia conflict and delays in customer call-offs. It also stepped up new market development initiatives to diversify into other geographies.

Value-added Agri products (VAAP) recorded strong growth, driven by spices and fruits and vegetables. However, lower domestic demand following the unprecedented tax increase on cigarettes continued to affect the overall leaf tobacco business.

ITC’s paperboards, paper and packaging section reported a 36% annual increase in revenue and a 48% rise in segment profit before interest and tax (PBIT). The firm  attributed the recovery to improving demand, pricing actions that mitigated higher input costs, and strong performance in key grades of value-added products, its sustainable portfolio and exports.

On Thursday, ITC shares settled at ₹266.40 apiece on the National Stock Exchange, rising 0.3%. The earnings, however, came after the market hours.