By Praveen Paramasivam and Ananta Agarwal
(Reuters) -Indian consumer goods major ITC and biscuit maker Britannia Industries beat estimates for quarterly profit on Thursday, benefiting from price increases and a recovery in rural demand.
Income support schemes by several states have encouraged people in rural India to spend more on food and other items, helping consumer goods companies to make up for a demand slowdown in urban areas.
“Rural consumption is expected to build on the gradual recovery momentum witnessed in recent months (on improving farm incomes),” ITC said, adding the revival was one of the “key positives” during the quarter.
Executives at consumer goods majors are now pinning their hopes on India’s newly announced plans to cut income tax rates to revive urban spending.
For the third quarter ended Dec. 31, ITC reported a 1% rise in profit to 56.38 billion rupees ($643.69 million), beating market expectations of 51.9 billion rupees, according to data compiled by LSEG.
Revenue rose nearly 9% to 182.9 billion rupees, helped by the Aashirvaad and Sunfeast parent’s expansion in rural and semi-urban areas as well as price increases implemented to make up for inflation in edible oil and cocoa.
Higher commodity prices squeezed margins but an 8% growth in its mainstay cigarette business cushioned the blow.
Britannia, which makes Jim Jam and NutriChoice biscuits, posted a 5% increase in quarterly profit to 5.82 billion rupees, crushing estimates of 5.21 billion rupees.
Revenue rose 8% to 45.93 billion rupees, led by “judicious price increases,” with Britannia warning of more raises.
“Rural demand is undoubtedly upbeat for consumer goods makers and volume-led sales growth posted by ITC and Britannia in challenging market conditions is impressive,” Centrum analyst Soham Samanta said.
(Reporting by Praveen Paramasivam in Chennai; Editing by Mrigank Dhaniwala and Anil D’Silva)
