Brokerage estimates reported by Informist point to a 27% to 29% decline in ITC Limited’s cigarette-segment earnings for the September quarter, as higher taxes and price increases weigh on sales ahead of the company’s results review.
Informist reported that an average of 15 brokerage estimates puts ITC’s net profit at INR 40.60 billion, down more than 20% from a year earlier. The same average projects net sales will rise about 3% to INR 185.58 billion. These are forecasts, not reported results.
Nuvama and JM Financial estimate cigarette volumes will fall 8% year over year, while Kotak Securities projects a 9% decline, Informist reported. JM Financial expects cigarette-segment earnings before interest and tax (EBIT) to drop 29%; Nuvama and Kotak Securities each project a 27% fall.
Government notifications show India raised the goods and services tax (GST) rate on cigarettes to 40% from 28%, effective Feb. 1. A separate central-excise notification lists duties by cigarette type and length, ranging from INR 2,050 to INR 8,500 per 1,000 sticks.
In its June-quarter statement, ITC said its “staggered and agile pricing actions” were intended to limit the risk of consumers shifting to illicit cigarettes. In that quarter, standalone earnings before interest, taxes, depreciation and amortization (EBITDA) fell 28% and profit after tax declined 27% year over year. Consolidated EBITDA and profit after tax before exceptional items fell 24% and 23%, respectively.
Forecast growth in other businesses could partly offset the cigarette pressure. Nuvama expects fast-moving consumer goods (FMCG) revenue to rise 11% and segment EBIT to increase 9% year over year. For paper, it projects revenue growth of 32% and profit growth of 15%, according to Informist.
Separately, The Economic Times reported that Nuvama forecasts consolidated revenue to decline 3% and EBITDA to fall 20%, with the EBITDA margin contracting 619 basis points to about 28.5%.
ITC’s board is scheduled to consider unaudited results for the quarter and six months ended Sept. 30 on Monday, Nov. 2, according to the company’s notice.
