ITC Q3 net profit rises 22% as price hikes support
ITC Ltd, the largest cigarette maker in India, posted a larger-than-expected 22 percent rise in quarterly profit, aided by price increases, but its shares slipped 2 percent on concerns about moderating volume growth.
Mumbai: ITC Ltd, the largest cigarette maker in India, posted a larger-than-expected 22 percent rise in quarterly profit, aided by price increases, but its shares slipped 2 percent on concerns about moderating volume growth.
India's fast moving consumer good (FMCG) companies have been reeling under rising input costs and sluggish consumer demand as high inflation and interest rates gnawed away at consumer spending.
ITC, which has a market value of about of USD 30 billion, sixth-largest in India, said net profit rose to Rs 17 billion in the third quarter ended December 31 from Rs 13.89 billion a year earlier.
Net sales grew 14 percent to Rs 62 billion for the company, which sells brands such as Sunfeast biscuits, Bingo snacks, and Mint-o-Fresh candies. It also makes personal care products and runs hotels.
The company, whose largest shareholder is British American Tobacco Plc, was forecast to report a 17 percent rise in net profit to Rs 16.2 billion.
"Volume growth has not been as substantial as in the first half of the year. Some tapering down has happened there, but the substantial price hikes they have taken in the past couple of months have helped them," said Naveen Trivedi, analyst with brokerage PINC Research.
The company plans to hike prices gradually by 6-7 percent this year across its packaged food categories, Chitranjan Dar, chief executive of its food business told Reuters last week.
ITC's revenues from its FMCG business, which includes cigarettes, grew 17 percent while the hotels posted a marginal fall of 1 percent. The company's agri business grew 10 percent helped by the depreciation of the rupee.
ITC trades at 22.6 times its 12-month forward earnings, compared with 28.1 times for India's largest consumer firm Hindustan Unilever, 32.8 times for Nestle and 18.3 times for Godrej Consumer.
Shares of the company, that has risen 15 percent in 2011, handsomely outpacing the FMCG index that rose 9.5 percent.