ITC Ltd., Asia’s second-biggest listed tobacco company, reported an 18 percent rise in first-quarter profit, the slowest pace in four years as India’s economic growth slowed. The stock fell.
Net income rose to 18.9 billion rupees ($320 million) in the three months ended June from 16 billion rupees a year earlier, the Kolkata-based company said in a statement today. This compared with the 19-billion rupee median of 30 analysts’ estimates compiled by Bloomberg.
India’s economy expanded at its slowest pace in a decade last fiscal year damping demand for consumer products. Revenues from cigarettes sales at ITC, which is partly owned by British American Tobacco Plc, will likely shrink in the short term because of the company’s push into shorter, cheaper cigarettes, Standard Chartered said in a July 12 report.
“It appears that the cigarette volume growth was lower than expected,” Rohit Chordia, analyst at Kotak Institutional Equities, said in an interview.
Cigarettes which are less than 65 millimeters in length are charged lower excise duties in India, and profit margins on them are also lower compared to the premium variants, according to IIFL Institutional Equities. The company introduced three brands of cigarettes during the quarter, according to the statement.
ITC shares dropped 4.5 percent to 358.9 rupees in Mumbai trading today.
Sales at ITC, which has the biggest weighting in the Sensex, rose 10 percent to 73.4 billion, also the slowest growth in four years, according to Bloomberg data. That fell below the 78.5 billion rupee median of 29 analysts’ estimates compiled by Bloomberg.
Profits before tax at its hotels business fell 66 percent to 89 million rupees, likely due to slowing economic growth and a fall in luxury travel, the company said.
Profit before tax for the cigarettes segment rose 18 percent to 22.4 billion rupees, while net cigarettes sales increased 7 percent to 35.4 billion rupees, the company said.
The consumer goods business, which includes Bingo packaged snacks and Fiama di Wills shampoo, narrowed its loss to 189 million rupees, from 388 million rupees in the same period last year.