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ITC posts better-than-expected profit as costs fall

Total expenses of India's biggest cigarette maker slump 38% in fourth quarter

ITC has been taking steep price increases to offset the pressure of declining sales volumes after the tax increases.   © Reuters

MUMBAI (NewsRise) -- ITC, India's largest cigarette maker, reported a better-than-expected fourth-quarter net profit, after it lowered expenses.

The company, also known for its Maurya hotel chain, said consolidated net income for the quarter ended in March rose 10% to 29.33 billion rupees ($432 million). Analysts were expecting ITC to report a net profit of 28.45 billion rupees, according to a Reuters poll.

Total expenses slumped 38% to 69.96 billion rupees. Sales in the quarter stood at 108.13 billion rupees. The company said its sales in the year-earlier period were not comparable as it included levies that have now been consolidated into the new Goods and Services Tax.

ITC has been grappling with a sustained rise in taxes, increasing illegal trade, and a regulatory clamp down on smoking that has hit its sales in recent years. India raised taxes on tobacco through the imposition of a special tax as part of a new nationwide GST unveiled on July 1.

Authorities have been trying to create public awareness on tobacco-related health issues, launching anti-smoking campaigns, and forcing companies to display larger graphic images on cigarette packs.

ITC has been taking steep price increases to offset the pressure of declining sales volumes after the tax increases. Cigarettes account for more than three-fourth of ITC's operating earnings.

ITC was spared a tax increase after the government set the new GST rates in July. As a result, the company didn't raise prices, which may have helped in volume growth in January-March, say analysts.

Cigarette sales for the quarter stood at 49.36 billion rupees. Brokerage Edelweiss Securities estimated a 1% decline in volumes in the fourth quarter after a sharp 5% cut in the third quarter.

The company also re-designated its Chief Executive and Whole-time Director Sanjiv Puri as the new managing director, effective Wednesday. ITC had last year elevated its operating chief Puri as CEO, after veteran incumbent Yogesh Chander Deveshwar retired.

Shares of ITC gained 1.5% in Mumbai trading on Wednesday, while the benchmark S&P BSE Sensex lost 0.4%.

--Dhanya Ann Thoppil

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