ITC profit hit by health warning row on ciggie packs

Cigarette sales have disappointed ITC this time around with a growth in business by just about 6.4% on year at Rs 8,231 crore in the first quarter against a stupendous 10% growth in the March quarter.

The cigarette volume growth came at a low 2%, half of what market was expecting at 4%.

"The performance of the cigarette business during the quarter remained subdued on account of continued pressure on the legal cigarette industry in India," ITC said in a statement.

Earnings before interest and tax, for the segment grew 8% to Rs 3,005 crore from Rs 2,781 crore on a year-on-year basis while margins improved by 50 basis points to 36.5% from 36% a year back on the back of some 5-6% weighted average price hike in cigarettes during the quarter.

The Ebitda growth has again slipped to a single digit after touching 11.5% in the March quarter.

Cigarette volume suffered because ITC's factories were partly shut during the quarter from April 1-15, and May 4-7 because of uncertainty regarding health warnings on cigarette packaging.

With stringent pictorial warning kicking in on April 1, dna had, in its analysis during the previous quarter, expressed doubts over ITC's ability to maintain tempo in cigarette sales.

ITC's other FMCG businesses including processed foods, snacks and apparel slipped into red with a loss of Rs 4.52 crore from a profit of Rs 70.83 crore in the March quarter for reasons which the company attributed to subdued demand and pricing pressure.

"Segment revenue grew by 9.5% during the quarter amid weak demand conditions and a price deflationary scenario particularly in the personal care business," ITC said in the release.

ITC's total net profit rose 10% to Rs 2,385 crore, compared to Rs 2,166 crore the same quarter last year while net sales grew 8.3% on a year-on-year basis to Rs 13,253 crore from Rs 12,232 crore.

Earnings before interest, tax, depreciation and amortisation rose 8% on year to Rs 3,430 crore with margins remaining unchanged at 26%.

Revenue from hotels remained flat at Rs 287 crore but turned up a profit at Rs 1.22 crore against a loss of Rs 7.25 crore year ago.

"The hospitality sector continues to be adversely impacted by a weak demand and pricing scenario against the backdrop of excessive room inventory in key domestic markets," the company said.

ITC's second-biggest business segment, agri produce, grew by a handsome 20% at Rs 2,794 crore driven by domestic agri commodity sales and leaf tobacco exports although Ebidta remained stagnant at Rs 237 core against 234 crore year ago due to pricing pressure.