ITC Turnover up Sharply But Profits 'Subdued'

Source from:  tobaccoreporter.com Oct 27, 2008 10/28/2008

With the organized tobacco industry sector having substantially vacated the non-filter cigarette segment of India's market since the country's budget was brought down earlier this year, illicit cigarette volumes are said to have trebled. ITC said in a press note accompanying its results for the quarter to the end of September that these illicit cigarettes were a growing threat to Government revenues, market stability and the social objective of regulating tobacco. Excise duties on non-filter cigarettes were raised by 140-390 per cent in the 2008 Union Budget, which led to ITC exiting the plain and micro segments of the market and consumers moving to revenue-inefficient forms of tobacco, including smuggled and tax-evaded cigarettes. ITC said the unprecedented increase in excise duties on non-filter cigarettes, steep increases in commodity prices and store rentals, the brand building costs of its new Personal Care portfolio, and the significant investments it had made in enhancing its distribution capability had combined to exert intense pressure on profitability during the quarter to the end of September. Consequently, pre-tax profits at Rs11.890 billion represented what the company described as a 'subdued' growth of 4.9 per cent over the pre-tax profits earned during the same period of the previous year. Post tax profit at Rs8.030 billion grew by 4.1%. Earnings per share stood at Rs2.13. Net turnover, at Rs37.630 billion, was up by 15 per cent, driven by the continued expansion of the company's new FMCG [fast moving consumer goods] businesses, which grew by 30 per cent, higher Paperboard & Packaging revenues and a strong performance by the Agri businesses. Enditem