India's ITC misses profit estimates as competition, costs rise

BENGALURU/CHENNAI, Oct 19 (Reuters) - Indias ITC (ITC.NS) reported a smaller-than-expected rise in its second-quarter profit on Thursday, as the consumer goods major grappled with stiff competition from smaller rivals and higher prices of some commodities.

Smaller operators took advantage of a drop in prices of some raw materials used in the consumer goods sector including milk, barley and tea, to better compete with deeper-pocketed giants such as ITC and Hindustan Unilever (HLL.NS).

\“When raw material prices are falling, it becomes a level playing field for both unorganised and organised competition,\” said Shirish Pardeshi, research analyst at Centrum Broking.

ITC, home to household brands such as Aashirvaad, Bingo and Yippie, said its biscuits, snacks, noodles and soaps businesses faced increasing competition, including from regional players.

Dove-soapmaker Hindustan Unilever said earlier in the day it lost some market share in its mass segment - comprising lower-priced products - due to competition.

However, prices of certain commodities such as wheat and sugar are still high, which pushed up ITCs total expenses 3% to 120.87 billion rupees for the three months ended Sept. 30.

The tobacco-to-hotels conglomerates profit still rose 10% to 49.27 billion rupees ($592.81 million), but missed analysts average estimate of 49.54 billion rupees, according to data from LSEG.

Revenue from operations rose 3% to 177.05 billion rupees, helped by a 10% surge in its cigarettes business.

ITCs shares, which had slipped nearly 2% in the September quarter, closed down 0.3% ahead of results.

Other consumer goods majors Nestle India (NEST.NS) and Hindustan Unilever eased past quarterly earnings estimates earlier on Thursday, as city dwellers spent more on affordable pick-me-ups like cookies and coffee.

($1 = 83.1121 Indian rupees)