By Timothy S. Donahue
Top Takeaways:
- Margins pressured: ITC said cigarette tax increases and rising raw material costs weighed down quarterly results.
- Pricing strategy: The company used targeted cigarette price increases and product mix changes to protect profitability.
- Leaf tobacco hit: ITC said geopolitical disruptions and tariffs pressured its agri-business, including leaf tobacco exports.
ITC reported modest quarterly profit growth Thursday, as higher cigarette prices and cost controls helped offset tax increases and rising raw material costs, partly tied to Middle East disruptions.
The Indian tobacco and consumer goods giant said that profit before exceptional items and tax rose 4.3% to 66.92 billion rupees ($695.6 million) in the March quarter. The company said India’s increase in excise duty on cigarettes pressured margins during the quarter, while costs for edible oil, soap noodles and packaging materials rose sharply toward the end of the reporting period.
ITC attributed some of the inflationary pressure to “supply chain disruptions and logistical challenges from the Middle East conflict,” including impacts from the Iran war. The company said it responded with calibrated price increases, product mix adjustments, and cost-control measures to protect cigarette volumes while maintaining profitability.
Analysts at Goldman Sachs said before earnings that cigarette price hikes across major brands ranged from 20% to 40%, though they estimated the increases may still fall short of fully offsetting the tax burden in the near term. Revenue from ITC’s cigarette business — the company’s largest profit contributor — rose by roughly 32% year over year to 110.66 billion rupees.
The cigarette division includes major Indian brands, including Gold Flake. Overall company revenue increased 17% to 216.95 billion rupees.
Outside tobacco, ITC reported stronger performance in its consumer goods segment, which includes packaged foods and household brands such as Aashirvaad, Sunfeast, and Bingo. The division recorded 15% revenue growth, and EBITDA margins improved by more than 200 basis points to 11%.
Meanwhile, ITC’s agri-business — which includes leaf tobacco sourcing, trading, and exports — declined by roughly 16% over the year. The company said the segment faced “significant disruption throughout the year” due to U.S. tariff measures and broader geopolitical instability stemming from the Iran conflict.
