Mumbai: India’s top tobacco firm, ITC Ltd, on Friday missed expectations with a 13% rise in quarterly profit as softer cigarette sales marred strong growth in its packaged foods and hotels businesses, pulling its shares down more than 4%.
Retail gain: A Mumbai shopkeeper arranges bottles of Fiama Di Wills shampoo, a product launched recently by ITC.
Rising incomes and modern retail are boosting demand for everything from shampoo to snacks that ITC is pushing into. But higher prices of raw materials such as palm oil and wheat are crimping margins, while higher inflation is encouraging shoppers to switch to cheaper unbranded options.
Kolkata-based ITC, 31.7% owned by British American Tobacco Plc., said net profit in its fiscal fourth quarter to end-March rose to Rs736 crore from Rs651 crore a year earlier.
Net sales rose to Rs3,934 crore from Rs3,466 crore.
That compared with a Reuters poll forecast of a net profit of Rs753 crore on net sales of Rs3,819 crore.
Full-year net profit rose 16% to Rs3,120 crore, almost in line with the average analyst forecast of Rs3,140 crore.
“The numbers are disappointing, and the company is obviously incurring expenditure on its new products, which will not yield profits quickly,” said Anand Shah at ICICI Securities Ltd.
ITC also has interests in apparel and packaging, and is expanding its range of foods and personal care products as a global shortfall in tobacco and higher taxes on cigarettes weigh. Revenue from cigarettes fell 47% in the March quarter, while revenue from other consumer goods business rose 48%.
ITC is investing Rs300 crore in a new food processing plant in eastern India to expand its packaged foods portfolio, which includes biscuits, salty snacks and ready-to-eat foods.
It is expected to add more personal and households care products to its shampoos and soaps, competing directly with market leader Hindustan Unilever Ltd, as well as Marico Ltd, Dabur India Ltd and Godrej Consumer Products Ltd.
Hindustan Unilever (HUL) in April posted a smaller-than-forecast 14% rise in quarterly profit to Rs381 crore.
ITC shares closed at Rs213.60, down Rs9.45, on the Bombay Stock Exchange. They trade at 23 times ITC’s forecast earnings, compared with 21.7 times for HUL. The stock had fallen 1.9% in the March quarter, compared with a 1.3% decline for the sector index and a 23% fall on Sensex.