ITC’s Revenue Grew by 20% Due to Increased Cigarette Prices

October 23rd, 2012 00:00

Cigarette manufacture ITC, produces four out of every five cigarettes available in India, met forecasts with a 20% increase in quarterly profit as boosted sales prices for its tobacco products kept margins from a slack volume growth.

The company, India’s fourth largest by market capitalization, has increased by approximately 15% since the beginning of this year to compensate the effect of higher taxes and severe anti-smoking regulations in particular Indian states.

The given taxes and regulations have limited volume growth, which was particularly languid with about 0.3 -0.4 % raise after a decrease in the previous quarter, according to representatives of the company, who were briefed by industry experts.

The manufacturer’s net revenue increased to 18.35 billion rupees ($345.60 million) for the quarter ended September, up from 15 billion rupees in previous year.

“The findings are positive, but I know that we can better… volume growth is still similar to a fight,” stated an expert who wanted to remain unknown. ITC never give details of sales volumes in its revenue statements.

Increased Cigarette Prices

ITC which is 33% owned by Davidoff maker British American Tobacco generates more than half of its profit from smoking products.

As Indian anti-smoking regulations become more and more severe, that business is affected by significant pressure, and the company is doing the best in order to switch to other product categories.

“They have pushed their diversification plans not so long ago so that is a positive now. They are moving in the right direction,” stated G. Chokkalingam, representative of the Centrum Wealth Management, who has been acquiring the stock for the past three months.

“We believe that in a few years, cigarettes would already occupy just a small part of the business,” he stated.

ITC, which owns a hotel network and also produces soap, shampoo and other products, declared that the net sales from its non-cigarette business increased 25% to 18 billion rupees.

Shares in ITC have extended gains and increased as much as 2.5% after the results, the latest in a current series of 298 rupees.

The stock trades at 25.5 times its 12 month forward profits, in comparison with rivals Hindustan Unilever’s 35.3 times.

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