ITC’s profit grows 8.7% as cigarette sales rise despite ban

ITC’s profit grows 8.7% as cigarette sales rise despite ban
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First Published: Tue, Jan 20 2009. 12 56 AM IST
Updated: Tue, Jan 20 2009. 12 56 AM IST
New Delhi: India’s biggest tobacco company, ITC Ltd, reported an 8.7% rise in third quarter profits on higher cigarette prices.
Net income rose to Rs903 crore in the three months ended December from Rs831 crore a year earlier, Kolkata-based ITC said in a statement to the Bombay Stock Exchange (BSE) on Monday. That’s in line with the Rs904 crore median estimate of nine analysts surveyed by Bloomberg.
ITC’s cigarette sales rose 18% even after the government imposed a ban on smoking in public places, including offices.
The company is expanding sales of shampoo, food, clothing and other goods as the government increases taxes and restrictions on cigarettes, which account for about half the company’s revenue.
“Cigarette sales have exceeded expectations,” said Abhijeet Kundu, an analyst at Mumbai-based Antique Stock Broking Ltd. “Increases in cigarette prices and some consumers moving to higher-priced filter cigarettes have contributed to the gains.”
ITC, 32% owned by British American Tobacco Plc., raised prices of its Gold Flake and Classic cigarette brands. In the budget for the year ending 31 March, the government raised taxes on non-filter cigarettes by as much as five times.
The company discontinued some non-filter cigarettes as a result, and raised the prices of some brands by as much as 10% in June.
The cigarette maker’s stock lost 0.99% or Rs1.70 to close at Rs170.55 on BSE in Mumbai on Monday. The benchmark Sensex rose 0.06% to 9,329.57.
ITC’s cigarette sales rose to Rs1,990 crore in the third quarter. The share of cigarette sales in revenue, excluding excise taxes, in the third quarter was 52%, compared with 49% in the same period a year ago.
The cigarette division’s profit before taxes and one-time gains increased 18% to Rs1,130 crore.
India imposed a nationwide ban on smoking in public places including office buildings, restaurants and pubs on 2 October.
ITC, which is investing in new businesses, said the losses incurred in garments, greeting cards, incense sticks and food widened to Rs127 crore from Rs64.47 crore a year earlier as ITC spent more on advertising its soaps and shampoo brands. ITC began selling Fiama di Wills shampoos, Superia soaps and the Bingo range of snacks in 2007.
Revenue from ITC’s hotel business fell 14% to Rs247 crore in the quarter. Profit before taxes and interest dropped 34% to Rs91.07 crore.
The twin blows of the economic slowdown and negative travel advisories arising from horrific terror strikes in Mumbai have resulted in a sharp drop in traffic, leading to lower room rates and occupancy, ITC said.
Profit before tax and one-time gains or costs at the company’s agriculture business, which includes commodity trading, rose 80% to Rs50.18 crore. Revenue fell 6.2% to Rs622 crore.
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First Published: Tue, Jan 20 2009. 12 56 AM IST
More Topics: ITC | Company Results | Sales | Cigarette | India |