ITC’s cash-cow, the cigarettes business, posted a low 0.6 per cent growth in sales for the December 2014 quarter over the year-ago period. The full impact of steady hikes in excise duties, which were passed on to the consumers, squeezed consumption.
This is a significant drop from the 14.2 and 18.8 per cent growth of the June and September 2014 quarters. New packaging and branding rules for cigarettes and the uncertainty over the ban on sale of loose cigarettes can keep volumes and sales subdued. The segment’s margins, though, improved to 69.7 per cent compared with 64.4 per cent in the year-ago period. Agri-business and paperboards segments clocked revenue declines of 11 and 4.7 per cent respectively.
The other FMCG business showed good growth on the sales front, besides moving back into profits after incurring losses in the June and September quarters. But given the competitive intensity in this space, weak consumer sentiment and new launches, profits have been nebulous for this segment and are set to remain so.
ITC’s hotels business is also battling low room rents and occupancies, though sales grew 4.7 per cent over the year-ago quarter. Overall, ITC’s December quarter sales were up just 2.1 per cent while net profit grew 10.5 per cent on lower costs.