ITC Q1 Profit Seen up 5%, Cigarette Volume May Fall 11-15%

Source from:  moneycontrol 10/30/2015

Cigarette-FMCG-to-hotel major ITC　is expected to report a 5 percent year-on-year growth in standalone profit at Rs 2,550 crore, according to average of estimates of analysts polled by CNBC-TV18.

Revenue is likely to increase 4.3 percent to Rs 9,420 crore from Rs 9,024 crore in same period, impacted by cigarette business that contributes nearly 50 percent to total revenue.

Cigarette volumes may see double digit decline for the fourth consecutive quarter but that decline may moderate from December quarter onwards, feel analysts. They expect cigarette volumes to decline by 11-15 percent in Q2 owing to price hikes against 16 percent fall in Q1FY16, 13 percent in Q4FY15, 14 percent in Q3FY15 and 5 percent in Q2FY15.

Analysts factored in another average price hike of 17-18 percent on maximum retail price. Cigarette gross sales may grow 5-7 percent year-on-year. According to them, best selling brands like Gold Flake and Classic may see pressure.

Operating profit is seen rising 5.3 percent year-on-year to Rs 3,675 crore and margin may expand 30 basis points to 39 percent in quarter gone by.
FMCG – Others may report steady performance in September quarter, which is estimated to report 11-12 percent year-on-year growth. Analysts expect EBIT (earnings before interest and tax) loss of Rs 5-7 crore in Q2 against loss of Rs 8 crore on sequential basis and loss of Rs 10 crore on yearly basis.

They expect Sunfeast to take advantage of Nestle Maggi noodles' absence as Sunfeast had significantly stepped up advertising spending to promote noodle brands.

They see raw material benefits from lower commodity costs.

Hotels and paper businesses are likely to see sequential improvement in growth rates. Hotel business may remain soft but may be aided by low base in year-ago period.

Analysts see increase in occupancy rates and expect margins to absorb depreciation from new properties.

Agri business is expected to witness decline owing to higher base and deficient monsoons (also subdued demand for wheat, tobacco and soya in the international market). Paper business may also see subdued growth owing to lower realisations. Enditem