ITC Net Rises 17% on Higher Cigarette Sales, Prices

Source from:  Bloomberg 07/24/2009

ITC Ltd., India's biggest tobacco company, posted a 17 percent increase in first-quarter profit on higher cigarette prices and an increase in volumes, beating analysts' estimates. Net income rose to 8.79 billion rupees ($181 million) in the three months ended June 30, from 7.49 billion rupees a year earlier, ITC said in a statement to the Bombay Stock Exchange today. That compares with the 8.18 billion rupee median estimate of 12 analysts surveyed by Bloomberg News. ITC, which gets about half its sales from cigarettes, raised prices of some brands after states including Delhi and Maharashtra raised value-added taxes. The Kolkata-based company is raising sales of shampoo, food and clothing as governments increase taxes on cigarettes and add restrictions on smoking. The government made it mandatory for all tobacco products manufactured after May 31 to carry graphic warnings. "The company had pushed cigarette stocks in the quarter ahead of the government's May 31 deadline for carrying pictorial warnings on packets," said Abhijeet Kundu, an analyst at Antique Stock Broking Ltd. He has a "buy" rating on the stock. "There has been about a 5 percent growth in cigarette volumes." The cigarette maker's shares rose 5.4 percent to 229.75 rupees in Mumbai trading. ITC, 32 percent owned by British American Tobacco Plc, has climbed 34 percent this year, trailing the 58 percent gain in the benchmark Sensex. Cigarette Sales Cigarette sales rose 23 percent to 21.5 billion rupees in the first quarter. Profit before taxes and one-time gains increased 17 percent to 11.3 billion rupees. ITC's overall sales in the first quarter rose 4.6 percent to 40.8 billion rupees. India's government has already imposed a nationwide ban on smoking in public places including office buildings, restaurants and pubs on Oct. 2 to prevent smoking-related diseases. The measures against smoking are being taken to curb tobacco use, forecast to cause about 1 million deaths a year in India by 2010. Sales from ITC's hotel business fell for the third straight quarter because of the global recession and the terrorist attacks in Mumbai in November. Sales declined 28 percent to 1.73 billion rupees in the quarter. Profit before taxes and interest fell 64 percent to 305.9 million rupees. ITC said losses incurred in new businesses, including garments, stationery products and food, narrowed to 997.7 million rupees from 1.23 billion rupees a year earlier. Sales rose 9.6 percent to 7.57 billion rupees. Profit before tax and one-time gains or costs at the company's agriculture business, which includes commodity trading, rose 31 percent to 998.9 million rupees. Revenue dropped 49 percent to 9.41 billion rupees. Sales at the company's paper business rose 16 percent to 7.03 billion rupees in the quarter. Profit before taxes and interest rose 3.5 percent to 1.28 billion rupees. Enditem