Beating expectations, ITC, India’s largest cigarette maker, posted a 26 per cent rise in net profit, led by a partial impact from an increase in cigarette prices post-Budget and an overall improvement in non-cigarette fast moving consumer goods (FMCG) and agricultural businesses.
The conglomerate has been forced to increase cigarette prices by 11 per cent since the Budget in March raised taxes on tobacco, triggering some concern among investors as volumes, according to analysts, moderated for the third straight quarter.
Its net profit rose to Rs 1,614.4 crore in the fourth quarter ended March, against Rs 1,281.5 crore in the same period last year. “Consistently if you take price hikes, volumes are bound to suffer and the slight dip there is dampening sentiment," said Naveen Trivedi, an analyst with Karvy Stock Broking.
“But their agri-business and foods has done well and offset some of the impact," he said.
The company, which also makes consumer goods of everyday use such as soaps, shampoos along with processed food items and exports agricultural commodities, said net sales grew 17.5 per cent to Rs 6861 crore. Net cigarette sales were up 17 per cent to about Rs 3,250, while non-cigarette FMCG segment's net sales rose 23 per cent to Rs 1,617 crore.
Sales at the company's agri-business, which gets a fifth of its revenue from exports of items such as basmati rice, processed fruits and soymeal, rose 31 per cent from the same period a year ago as a sliding rupee bolstered earnings.
Brokerage ICICI Direct expects the company, which gets nearly half of its revenue from cigarettes, to hike prices by another eight per cent this year. Cigarette volume growth dipped to around five per cent from six per cent in the same period a year earlier, analysts said.