May 21 (Reuters) – India’s ITC posted a marginal rise in quarterly adjusted profit on Thursday, as price increases in its core cigarette business cushioned some of the impact of a tax hike and an Iran-war-led rise in raw material costs.
Prices of key raw materials such as edible oil, soap noodles and packaging inputs rose sharply towards the end of the March quarter, the consumer goods major said, due to supply chain disruptions and logistical challenges from the Middle East conflict.
India’s excise duty hike on cigarettes also squeezed the bottomline for the Gold Flake-cigarette maker.
However, cost-control measures, price hikes calibrated to protect volumes, as well as a change in the product mix took some of the pressure off, according to the firm.
ITC’s profit before exceptional items and tax rose 4.3% to 66.92 billion rupees ($695.6 million) in the March quarter. The company had made a one-time gain of 151.79 billion rupees in the year-ago quarter following the demerger of its hotels business.
Analysts at Goldman Sachs said in a pre-earnings note that price hikes of 20%-40% across key cigarette brands were lower than what would be required to fully offset the tax increase, implying some near-term pressure on margins.
Revenue from the cigarettes business, which accounts for the bulk of ITC’s profit, rose about 32% to 110.66 billion rupees. Overall revenue climbed 17% to 216.95 billion rupees.
CONSUMER GOODS AND AGRI SEGMENTS
ITC logged a 15% growth in revenue in the consumer goods segment, which houses brands such as Aashirvaad, Sunfeast and Bingo, on broad-based growth across categories. The segment’s EBITDA margin rose more than 200 percentage points to 11%.
The agri business’ revenue fell about 16% as it faced “significant disruption during the year”, the company said, triggered by tariff measures imposed by the U.S. as well as challenges from the Iran war.
The segment includes trading, sourcing and exports of commodities such as rice, coffee and leaf tobacco.
($1 = 96.2000 Indian rupees)
(Reporting by Surbhi Misra and Devika Nair in Bengaluru; Editing by Janane Venkatraman)
