Cigarette business reported 7.1% increase in net sales and 18.0% increase in EBIT as margins expanded 590bps. Volumes declined 1.5% as realizations increased 15%.
64mm cigarettes continued to report strong traction as ITC launched three new offers - 'Flake Galaxy', 'Flake Liberty' & 'Silk Cut Virginia' in this segment in various markets. ITC has increased prices by another 2% in July mainly due to price increase in Gold
Flake Filter which should support profitability and enable 18% cigarette growth in
FY14 even as full impact of VAT changes will be reflected in the coming quarters.
Recent judgment of the Supreme Court revoking the stay on surrogate advertising for tobacco products is unlikely to impact the industry negatively. We are increasing cigarette EBIT growth estimates for FY14 from 15% to 18% due to 17% increase in prices as against earlier estimates of 15%.
FMCG BUISNESS OVERVIEW
FMCG business posted 18.4 sales growth to Rs17.4b, EBIT loss declined 51% to
Rs(189m) led by higher expenses on new launches and brand building. ITC launched
Sunfeast Delishus cookies, Yumitos Potato chips, Engage Deo’s, Vivel cell renew skin care products and new variants under Vivel and Fiama Di Wills brands.
Processed Foods maintained double-digit growth with key brands like 'Aashirvaad',
Sunfeast and Bingo sustaining strong momentum. ITC launched 'Sunfeast Delishus' gourmet cookies in two delectable variants viz., 'Nut Biscotti' and 'Nut and Raisins', and 'Candyman Jellicious' in the jelly segment. Bingo launched 'Yumitos' sub-brand for its potato chips keeping with its value proposition of fulfilling the consumer need of 'casual snacking' with new packaging and 2 new flavours - 'Apnu Mithu' and
'Masala Jalsa' for the Gujarat market. In the Instant Noodles category, ’Sunfeast
Yippee!' continued to grow at a rapid pace on the back of new launch of 'Chinese
Masala' variant
Net sales have increased by