Cigarette drag

BS Compass

 Against anticipated growth of around 10 per cent, ITC reported a 12.5 per cent improvement in the bottomline compared with the corresponding quarter last year. This was on account of a 41 per cent jump in other income (treasury income) and a 8 per cent improvement in operating profits.

 The disappointing bit about the results was the lower-than-expected growth in cigarettes revenues at 3.5 per cent compared with 2Q last year.

 More significantly, volumes have also grown only marginally by 1-1.5 per cent compared to last year. This has taken analysts by surprise, since volumes were expected to show higher growth, since there have been no tax increases over the last couple of years.

 Obviously, with volumes not growing, it is improved realisations and product mix that have driven revenues. There have been increased sales of high margin products and a rise in prices of some brands.

 The impact of higher realisations is also seen in the marginal improvement in EBIT margins to 22.89 per cent, while the other component of its FMCG business