Tobacco.org

ITC’s cigarette biz drives margin improvement  

ITC Ltd’s December quarter results show a company in fine form, extracting the most out of its cigarettes’ franchise, with its other businesses providing able support. But it would be natural for shareholders to keep an eye on the national budget.

The government’s desire to increase revenue may see it hike duties on cigarettes. Cigarette companies argue that undue duty hikes only pushes users to illegally sell cigarettes. While the likelihood of a duty hike is higher this year, ITC has proven that it has the capability to ultimately overcome such obstacles in its cigarettes business.

In the December quarter, ITC’s sales rose by 14.2% year-on-year to Rs6,195 crore while net profit rose by 22.5% to Rs1,701 crore.

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VIDEO: ITC's cigarette margins will continue to go up, say experts 

Cigarette major ITC 's second quarter FY12 sales numbers were up 17.5% at Rs 5,945 crore versus Rs 5061.2 crore and the profit after tax (PAT) was up 17.9% at Rs 1470 crore versus Rs 1246.7 crore.

The ITC Q2FY12 numbers were inline with our expectations, said Himani Singh, equity research analyst at Elara Capital and Sanjay Manyal, research analyst at ICICI Direct. Both shared a common view that the cigarette margins would continue to go up.

While Singh sets a target price of Rs 241 for the stock, Manyal remains positive on 226 levels target.

Moreover, Singh feels that the company would surprise on the positive side for this financial year. Manyal stressed on being positive on the cigarette margins.

Here is the edited transcript of their interview. Also watch the accompanying video. . . .

Q: What is your view on the stock at this point in time? The stock is trading at 206 levels.

Manyal: We are positive as far as ITC is concerned. The cigarette margins continue to go up. Our target remains at 226 levels, almost 10% upside from here.

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ITC Q2 net profit up 21.46 pc at Rs 1,514.31 crore  

Diversified business firm ITC today posted 21.46 per cent rise in net profit at Rs 1,514.31 crore in the second quarter ended September 30.

The company, which sells personal care brands like 'Fiama Di Wills', 'Vivel' and 'Superia' had a net profit of Rs 1,246.74 crore in the quarter ended September 30, 2010, ITC said in a filing to the BSE.

During the July-September quarter this fiscal, the firm's net sales rose by 17.52 per cent to Rs 5,974.18 crore from Rs 5,083.48 crore posted in the same period last fiscal.

While the firm's FMCG segment, which includes its cigarette business, had a 19.49 per cent jump in its net revenue to Rs 4,308.80 crore, its hotel business revenue rose marginally by one per cent to Rs 211.14 crore.

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ITC Profit Rises 21% ($$) 

Cigarettes-to-hospitality company ITC Ltd. Monday exceeded market estimates with a 21% jump in second-quarter net profit, as the company improved profits from all its businesses, especially cigarettes.

Net profit for the quarter through September rose to 15.14 billion rupees ($304 million) from 12.47 billion rupees a year earlier, beating the 14.66 billion rupees average of forecasts in a Dow Jones Newswires poll of 13 analysts.

Sales climbed almost 18% to 59.74 billion rupees from 50.83 billion rupees.

The company gets half its sales from cigarettes and the rest from businesses as varied as hotels, packaged foods, education and stationery products, personal care products, paper and packaging, and agriculture.

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ITC chief’s post may be split after 2013 

ITC Ltd is said to be considering a succession strategy that could split the position of chairman and CEO. Although a final decision is still a way away, there is talk of Y C Deveshwar continuing as chairman for another five years after his current term ends in 2012, but handing over the CEO's job in 2013 or 2014.

While shareholders have approved a fresh five-year term for Deveshwar, senior-level sources close to financial institutions, which control around 31% in the Rs 32,000 crore company, said that only part of Deveshwar's five-year term might be as chief executive. They said there was a strong likelihood that the next chief executive would also be from within.

ITC, which on Wednesday had described it as speculative, on Thursday said, "This news is false, baseless and irresponsible. There is no plan to split the chairman's position. As has already been said before, succession in ITC is due in 2017".

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• LIC's tobacco stain shows 

The Life Insurance Corporation (LIC) invested more than Rs 3,600 crore last year in the tobacco industry, anti-tobacco activists and cancer specialists said today, describing the investments as ironical and unethical.

Figures obtained through the right to information route by a consortium of activists and doctors show that in 2010-11, LIC had invested in shares of ITC and VST Industries and in debentures of Dharampal Satyapal Ltd, which makes chewable tobacco products.

The LIC investment in ITC had a book value of more than Rs 3,561 crore, while its investment in VST Industries was about Rs 15 lakh, according to information released by the company. It also invested Rs 50 crore in Dharampal Satyapal.

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• Tobacco industry relying on movies for brand promotion  

The tobacco industry is increasingly leaning on movies for the promotion of its business in India and several other countries following the ban on tobacco advertising, the WHO has warned.

Of late, the industry has also been denied the sponsorship of sports and music events, compelling it to shift its focus to films, the global health body observes in the report "Smokefree movies: From evidence to action".

Hollywood actor Sharon Stone in Basic Instinct glamourised smoking.

A survey of popular films has shown that tobacco brand displays exploded in Bollywood after its advertising was banned in the media in 2004. Of the 395 top grossers in 1990-2002, 76 per cent depicted the use of tobacco. The percentage of scenes showing lead actors or heroes using tobacco increased from 22 in 1991 to 54 in 2002. Of the 110 Hindi movies produced in 2004-2005, 89 per cent depicted tobacco use. The lead actors were shown smoking in 76 per cent of these movies.

The brand display was more or less even between premium cigarette brands belonging to the British American Tobacco, its Indian partner (the Indian Tobacco Company) and competing brands belonging to the Philip Morris International, whose entry into the Indian market coincided with the ban on tobacco advertising.

Using movies to promote smoking is a global phenomenon. In the UK, where almost all forms of tobacco advertising are prohibited, youth-rated films from the US contained 83 per cent of all tobacco visuals in 2001-2006.

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ITC's investment plan may be delayed by a year 

Cigarette-to-hotels conglomerate ITC's Rs.23,000-crore investment plan announced last year, may get delayed by an year or so, Chairman Y. C. Deveshwar said. He also said that plans were afoot to enter the diary business.

Addressing a pressmeet after the company's 100th annual meeting, he said that the plan across all sectors of operations and with a five-year timeline was getting delayed. “We are not happy with the pace of execution. Multiplicity of approvals, and land issues were delaying projects, which may now take six years. But they are by and large on track,” he said.

In West Bengal too, its investment plans for a food processing unit has hit the land hurdle with the land earlier allotted, emerging to be a disputed one.

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Land, regulatory issues delaying capex plans: ITC 

Mr Y.C. Deveshwar, Chairman, ITC Ltd, today said that issues pertaining to land and regulatory approval were impacting timely implementation of the company's Rs 23,000-crore capital expenditure plan.

ITC previously proposed a five-year investment plan, ending in 2016, in FMCG, hotels and paper and packaging businesses. The company is now expecting to complete the projects by 2017.

"We are not happy with the pace of execution. Most of the delay is beyond ITC's control. It is due to multiplicity of regulatory approvals," he said at a press meet after the company's 100{+t}{+h} annual general meeting here on Friday.

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ITC non-tobacco biz to be profitable before I retire: Deveshwar 

Diversified conglomerate ITC Ltd's Chairman Y C Deveshwar today said the non-tobacco FMCG business will become profitable before he retires from the company. "Before I hang up my boots, the non-tobacco FMCG business will be profitable," Deveshwar told shareholders at the 100th annual general meeting of the company here.

The shareholders granted extension of Deveshwar's tenure as chairman of ITC for a period of five years with effect from February, 2012.

Replying to shareholders' queries, Deveshwar said the non-tobacco FMCG business of ITC was competing with several other companies.

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ITC to turn personal care and branded food business profitable in six years: Deveshwar 

Tobacco-to-hospitality conglomerate, ITC Ltd is going to turn its personal care and branded food business profitable over the next six years with plans to emerge as one of the largest FMCG company in India, chairman YC Deveshwar said.

Addressing shareholders in the company's 100th annual general meeting held here on Friday, Deveshwar said the company is expected to soon reach the tipping point in the non-cigarette FMCG business. "I will ensure these businesses become profitable before I hang up my boots. The signs of break-even are already there," he said.

Deveshwar has already announced that he will retire by 2017 as the chairman of the company. ITC has reduced its losses in the personal care and branded food business to Rs 76 crore in the first quarter of the current fiscal from Rs 89 crore as compared to the same period last fiscal.

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ITC resents government’s take on CSR bill 

Consumer goods giant, ITC Ltd on Friday opposed the government proposal to earmark 2% of net profit for mandatory Corporate Social Responsibility (CSR), citing scope for corruption and personal gain. The announcement was made at the company’s 100th Annual General Meeting held in Kolkata.

“Prescribing outlays is akin to an additional tax on corporates that seeks ‘compliance’ rather than ‘commitment’ in making social investments. In unscrupulous hands, such an expenditure obligation will only encourage creative accounting to channelise funds for partisan purposes. Such prescriptive spends are unlikely to tap the larger managerial and creative capacity of business organisations to create self-sustaining and enduring social upliftment. On the other hand, it may potentially enlarge the scope for corruption and personal gain,” said Y C Deveshwar, Chairman, ITC Ltd.

Meanwhile, ITC is aggressively looking at expanding into the dairy business.

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ITC secures LEED platinum rating for all its luxury hotels  

Cigarette-to-hotel major, ITC Ltd has secured the LEED platinum rating for all its luxury hotels making it one of the greenest luxury hotel chain in the world. The rating would mean leadership in energy and environmental design for the highest standards of energy, water and waste efficiency.

The rating is conducted by the U.S. Green Building Council which strives towards making buildings greener as per environmental norms. The platinum certification has been conferred to the ITC properties in New Delhi, Mumbai, Kolkata, Bangalore, Hyderabad and Agra.

ITC's executive director Nakul Anand said the platinum rating exemplifies the credo of responsible luxury adopted by the company's hotel division. . . .

The U.S. Green Building Council president, CEO & founding chair Rick Fedrizzi said the LEED platinum rating demonstrates tremendous green building leadership and ITC's achievement is a commendable one.

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ITC Net Profit Rises 25% ($$) 

ITC Ltd. Friday exceeded market estimates with a 25% jump in fourth-quarter net profit, driven by strong performances across all its businesses, but investors were disappointed as its operating margin shrank sequentially.

Net profit for the quarter through March rose to 12.81 billion rupees ($285 million) from 10.28 billion rupees a year earlier, topping the 12.73 billion rupees average of forecasts in a poll of 16 analysts.

Sales climbed 15% to 58.36 billion rupees from 50.54 billion rupees, a tad lower than the 58.76 billion rupees forecast.

The company gets almost half its sales from cigarettes. The rest comes from businesses as varied as hotels, packaged foods, education and stationery products, personal care products, paper and packaging, and agriculture.

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• After losing voice he loses case against ITC  

The State Consumer Forum has dismissed the complaint filed by Commissioner of Customs and Central Excise Deepak Kumar against tobacco giant ITC alleging that he lost his voice after he was detected of cancer of the larynx that was caused due to smoking ITC cigarettes.

A three-member bench headed by Justice S B Mhase along with S R Khanzode and I D Yengal on Wednesday dismissed the complaint filed by Kumar under the Consumer Protection Act (CPA) saying that there was merit in the submissions made by the opponent (ITC).

At the last hearing, senior counsel Navroze Seervai arguing on behalf of ITC said that Kumar has no ‘proof of sale’ to establish that the cigarettes he smoked were manufactured by ITC.

Also that a complaint is maintainable under CPA, only if the goods are ‘defective’ he contended. Seervai had argued that Kumar was unable to establish that the cigarettes he smoked were ‘defective.’ . . .

Kumar, who lost his voice after his larynx was removed to prevent the spread of cancer to other parts of his body, had alleged that the four scientists - Jeffrey Idle, Michael Lewis, Jaques Lelorier and Cyril Fisher - have long been associated with the British American Tobacco Company (BAT), which holds 30 per cent stake in ITC.

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