ITC Limited, India’s leading cigarette manufacturer, reported a 20% year-on-year drop in quarterly profit on Monday. The decline came as rising raw material costs, partly linked to the Middle East conflict, and higher cigarette prices put pressure on consumer demand.
The tobacco industry, including ITC and Godfrey Phillips India, has increased cigarette prices in recent months. These hikes followed the government’s introduction of an additional excise duty on cigarettes this year as part of its efforts to discourage smoking.
Cigarette Business Faces Pressure
ITC said cigarette sales volumes continued to face challenges due to the significant increase in taxation. Its cigarette division, which contributes the largest share of the company’s earnings, recorded a profit decline of more than 25% during the quarter ended September 30.
The company’s total profit stood at ₹41.37 billion (approximately $436.14 million). Meanwhile, material costs increased by 15%, reflecting a sharp rise in input expenses.
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Revenue Rises Despite Profit Decline
Despite the pressure on profitability, ITC’s revenue increased 46% to ₹283.18 billion. Strong demand for consumer products and price increases across its portfolio helped support overall revenue.
ITC owns popular consumer brands such as Sunfeast and Aashirvaad, alongside its major cigarette business.
The company also noted that demand remained steady across both rural and urban markets. However, it warned that uneven and below-normal monsoon rainfall, along with strengthening El Niño conditions, could affect agricultural production and push inflation higher.
ITC Shares Underperform the Market
Other major consumer goods companies, including Hindustan Unilever and Nestlé India, have also highlighted the impact of rising commodity costs.
ITC shares have declined by more than 33% over the past year, significantly underperforming the Nifty 50, which fell around 9% during the same period. However, ITC stock ended slightly higher in the trading session ahead of its quarterly earnings announcement.
The latest results highlight the challenges facing ITC as higher taxes, expensive raw materials and cigarette price increases weigh on its core tobacco business.
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