Higher price of cigarettes pushes ITC profit up 10 pc

The countrys top cigarette maker,ITC Ltd,increased March quarter profit by 10 per cent after it raised prices...

The countrys top cigarette maker,ITC Ltd,increased March quarter profit by 10 per cent after it raised prices,although total sales,including its hotel,agri-commodity and consumer goods units,fell 1 per cent.

Cigarette sales,which account for more than 60 per cent of ITC revenues,rose 10.2 per cent in the quarter. Fast-moving consumer goods (FMCG),which make up about 14 per cent of sales,rose at 13.6 per cent.

The company said it was restructuring its agri-commodity business,where revenues almost halved in the March quarter from a year earlier,to better meet its sourcing needs.

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The margin expansion was more than what we expected, said Anand Shah,an analyst with Angel Broking. The losses in the non-cigarette FMCG segment has stabilised,which we feel is a good sign. We do not feel this will make profits very soon… that will take about one year to 18 months, he added.

ITC,which is 31.7 per cent owned by British American Tobacco,reported a net profit of Rs 809 crore ($172 million) on net sales of Rs 3,892 crore. The company should see a recovery in the second half, Shah said. Angel Broking has a buy recommendation on ITC.

ITC said its hotels business revenues fell in the quarter,with low occupancy levels and a sharp fall in average room rates,following the attacks on Mumbai last November last year.

The hotels business continues to pursue an aggressive investment-led growth strategy,recognising the long-term potential in India, ITC said. Shares in ITC,which has a market value of $14.5 billion,rose 0.6 per cent to Rs 183.25 in a Mumbai market that rose 1.1 per cent on Friday. The companys shares have risen about 7 per cent so far this year.