- Indian cigarette giant's profit misses estimates on curbs
- Taxes on tobacco likely to increase in Modi's FY17 budget
ITC Ltd., Asia’s second-largest publicly traded tobacco company, reported earnings that fell short of analyst estimates as the Indian government’s campaign against smoking dented cigarette sales.
Net income in the quarter through December remained little changed at 26.5 billion rupees ($392 million) from a year ago, the Kolkata-based consumer-goods company said Friday. That compares with the 27.6 billion-rupee average of analysts’ estimates compiled by Bloomberg. Revenue rose 3.4 percent to 91 billion rupees, missing the estimate of 94.5 billion rupees.
The government has raised taxes, imposed rules that require graphic warnings on packages and barred smoking scenes in films as it seeks to reduce tobacco use and fight related illnesses that kill a million Indians annually. As a result of the tax burden, the cigarette business continues to be under “severe pressure,” ITC said in an e-mailed statement Friday.
Cigarettes sold in the quarter probably fell as much as 10 percent, said Sachin Bobade, consumer analyst at HDFC Securities Ltd. in Mumbai. Prime Minister Narendra Modi may propose more levies on Feb. 29 in the budget for the year starting April 1, according to Bobade.
“The government’s focus is mainly on increasing the excise taxes,” as a way to curb the nation’s addiction to smoking, said Bobade, who has a neutral rating on the stock. “The stock is likely to remain subdued for quite some time.”
Shares of ITC rose 0.8 percent to 308.75 rupees at the close of trading in Mumbai. The stock has lost 5.8 percent this year, compared with a 6.4 percent drop in the benchmark BSE India Sensex Index.
ITC, which is part-owned by British American Tobacco Plc, has tried to reduce its reliance on cigarettes over the past decade, diversifying into other consumer products such as soaps and snacks. While it has emerged as the nation’s second-biggest consumer goods maker in that time with a portfolio spanning foods, soaps, apparel and incense, it still relies on tobacco products for profits.