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Last Updated : Oct 22, 2011 04:01 PM IST | Source: Moneycontrol.com

Strong cigarette sales, price hikes to fuel ITC Q2 results

FMCG companies in India have been grappling with high input costs and margin pressures over the last several quarters. There are also worries that consumers may resort to downtrading or cut back on spending if the overall economic uncertainties continue and RBI hikes interest rates further.

 
 
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Moneycontrol Bureau


FMCG companies in India have been grappling with high input costs and margin pressures over the last several quarters. There are also worries that consumers may resort to downtrading or cut back on spending if the overall economic uncertainties continue and RBI hikes interest rates further.


However, there will be no such concerns for ITC when it reports second quarter results on Monday. Its bread and butter cigarettes segment continues to surge ahead as consumers smoke away, despite price hikes and pictoral warnings.


The company has raised prices of its Navy Cut and Classic brands by 10%, and analysts expect there will be more price hikes in coming quarters.


"The company has not raised prices enough to compensate for the VAT increase in Tamil Nadu, West Bengal and Andhra Pradesh in the second quarter," say Amnish Aggarwal and Harit Kapoor of Motilal Oswal Securities.


Still the price increases that ITC has taken will boost EBIT [earnings before interest, taxes] margins by 80 basis points, they say. Its cigarette volumes are expected to grow 7% in July-September,

Bank of America Merrill Lynch sees ITC

First Published on Oct 22, 2011 03:04 pm