Consumers might have to bear a portion of Centre's proposed move to guarantee a Minimum Support Price (MSP), which would be 50 per cent more than the cost through higher prices in the fast moving consumer goods (FMCG) space, S Sivakumar, group head, Agri-business and IT of one of India's largest agribusiness player, ITC Ltd said.
He said while companies might absorb a part of the additional cost, once revised MSPs are in effect, they would also have to pass on some of the extra burden to the consumers.
EBITDA rose 10.1% y-o-y to Rs 39 billion, while adjusted PAT increased 6.5% y-o-y to Rs 28.2 billion. Cigarette volume decline is likely to have been 2%. Calculated cigarette revenue grew 14% y-o-y, while cigarette EBIT increased 8% (410bp contraction in margin). There has been no price increase over the last three-four months, unlike the previous years, when ITC used to increase prices ahead of the budget. FMCG – Others’ sales were up 12.2% y-o-y to Rs 28.7 billion, with EBIT profit of Rs 470 million v/s Rs 197 million loss in 3QFY17, led by enhanced scale, mix and cost efficiencies.
In any other year, this month would have been the occasion to wonder if ITC Ltd would face a hike in duties on cigarettes in the Budget. Under the goods and services tax (GST), that has changed as the rate fixing decision now rests with the GST Council. Not that it has made life easier for ITC. The surprise hike in cess on cigarettes in July has hit ITC’s performance for the second quarter now.
Even as cigarettes’ sales volume is likely to decline by 2-5 per cent during October-December period of the current financial year, increased revenue from other segments is likely to result in ITC Ltd posting an eight per cent growth in its topline at around Rs 99-100 billion. The company’s net profit is expected to hover around Rs 26-28 billion.
In the third quarter (Q3) of the last financial year, the company had posted a Rs 26.40 billion bottom line and a Rs 97.64 billion topline.
ITC Limited is an Indian company, headquartered in Kolkata, West Bengal, which deals in consumer goods, hotels, paperboards and packaging, agri business and information technology. The company was established in 1910 as the Imperial Tobacco Company of India Limited. Later in 1970, it was renamed as the Indian Tobacco Company Limited and further to I.T.C. Limited in 1974.
ITC Ltd’s shares have not recovered from the blow dealt by the steep hike in cess on cigarettes. Even five months down the line, there were no signs investors were doing a rethink. Could last week’s Karnataka high court ruling change that?
The court struck down government rules requiring larger graphic warnings on packs. A Reuters report said the government will appeal the decision in the Supreme Court, indicating that the legal process will take some time.
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