Cigarette taxes weigh on ITC results, shares fall

REUTERS - India's largest cigarette maker ITC Ltd's quarterly profit fell slightly short of analyst estimates as higher taxes on smokes and a government push to discourage tobacco consumption hurt sales, sending shares down 5 percent Wednesday.

ITC sells four out of every five cigarettes in India and is nearly 25 percent-owned by British American Tobacco.

For the quarter ended Dec. 31, Kolkata-based ITC earned 26.35 billion rupees, while analysts were expecting the company to earn 26.92 billion rupees, as per Thomson Reuters data.

Sales came in at 88 billion rupees, up 2 percent from the year-ago quarter, but down 1.4 percent sequentially.

ITC, which sells brands like Gold Flake, Classic and India Kings, makes most of its revenues from cigarettes.

The impact of high taxes and duties was "exerting unprecedented pressure on legal (tobacco) industry sales volumes," ITC said in a statement.

For the December quarter, the company saw sales of about 41 billion rupees from cigarettes, the rest coming from its hotels, consumer goods, agriculture and other businesses.

Prime Minister Narendra Modi's government, which took office last year, has been adopting measures to curb India's tobacco consumption.

It has increased taxes on tobacco products, ordered companies to stamp health warnings across 85 percent of the surface of cigarette packs and is considering banning the sale of single cigarettes, which make up about 70 percent of cigarette sales in the country.

(Reporting by Nivedita Bhattacharjee in Mumbai; Editing by Anupama Dwivedi)