ITC Ltd, India’s largest cigarette maker, relied on price increases to post a better-than-expected rise in quarterly profit as cigarette volumes slackened, sending down its shares by 3.8%, their biggest fall in nearly a year.
Analysts who spoke with the company said that cigarette volumes grew 4-5% in the third quarter, while prices rose 8-8.5% ahead of an expected steep increase in excise taxes expected in the upcoming Budget. “There has been a slight drop, about a percentage point lower, in cigarette volumes from what was expected, and because that is the largest segment it is hurting sentiment,” said Arnab Mitra, an analyst at India Infoline Ltd.
Cigarettes make up about 50% of the sales of the company, which is 31.7 percent by British American Tobacco Plc.
ITC, which also makes packaged foods, personal care products and runs hotels, reported a 22% rise in net profit to `1,700 crore for the quarter ended December 31.
The company, whose brands include Sunfeast biscuits, Bingo snacks and Mint-o-Fresh candies, was expected to report a profit of `1,620 crore. Net sales rose 14% to `6,200 crore. Revenue from ITC’s FMCG business, which includes cigarettes, grew 17% while the revenue in its agri business increased 10%, helped by the depreciation of the rupee. The hotels business, however, was hurt by the weak macro-economic environment in the US and
Europe. Hotel revenue fell 1% to `310 crore, although
earnings rose 15% to `102 crore. Reuters
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