India’s largest tobacco company, ITC, beat rates with a 20% increase in quarterly revenue as cigarette volumes increased after four quarters of flat growth, improved by the introduction of low-cost tobacco products during the quarter.
The company’s net revenue increased to Rs 2050 crore for the quarter ended December 2012. Net sales went up 23% to Rs 7630 crore.
Higher taxes and stronger anti-smoking rules in some states have influenced sales of the tobacco company, which generates four out of every five cigarettes sold in India.
Cheaper cigarettes increased volume growth at 3% after a marginal raise of 0.4% in the previous quarter. ITC does not present information of sales volumes in its earnings statements.
“The cigarette industry in India remains affected by a discriminatory taxation and regulatory policy framework, ITC said.
“The high occurrence of tax on cigarettes has produced tax arbitrage opportunities resulting in the growth of illicit cigarettes in India. As a result, legal industry volumes were under influence of severe pressure,” the statement said.
ITC, which is 30.8% held by British American Tobacco, creates about half its income from cigarettes. The firm also is the owner of hotels and produces products such as soap and shampoo. It stated net sales from its non-cigarette business increased 30% to Rs 1780 crore.
Shares in ITC, a selection for fund portfolios that estimate it recession-proof, went up by 1.6% after the results, after dropping more than 10% in December 2012.