ITC misses street estimate as cigarette tax weighs heavy

KOLKATA: ITC Ltd’s third-quarter profit missed market expectations as higher taxes limited growth at its flagship cigarette business, sending company’s shares sharply lower on Wednesday. Net profit rose 10.4% to Rs 2,635 crore in the October-December period; analysts on average were expecting Rs 2,692 crore, according to Thomson Reuters.

Net sales grew a marginal 2% to Rs 8,800.22 crore as robust sales in packaged food, personal care and stationary products grew better than rivals, partly offsetting nearly flat growth in cigarettes and lower revenue from some other divisions such as agri-business. The hotel segment posted marginal growth.

ITC shares fell 5% on the Bombay Stock Exchange to close at Rs 352.60 on Wednesday, when the benchmark Sensex rose 0.4%.

In a news release, ITC said the quarterly performance reflected the full impact of the steep excise duty hike – up to 72% - on cigarettes announced in the last Union Budget.

Recent sharp increase in value-added tax by Tamil Nadu, Kerala and Assam – markets which account for 30% of sales – also hurt cigarette business that brings a little less than half the sales at the company, it said.