Top Indian cigarette maker ITC's profit drops 20% as higher prices dent demand

Nov 2 (Reuters) - India's top cigarette maker ITC ITC.NS reported a 20% decline in quarterly profit on Monday, hurt by raw material inflation linked to the fallout from the Middle East war and higher cigarette prices that affected demand.

Across the Indian tobacco industry, which includes Classic owner ITC and Marlboro maker Godfrey Phillips GDFR.NS, brands have raised prices in recent months after India imposed an excise duty on cigarettes this year to curb smoking.

"Industry volumes remain under pressure due to unprecedented increase in tax," ITC said in an investor presentation.

Profit from its cigarettes business, which brings in the bulk of the group's earnings, fell by more than a quarter in the three months ended September 30, with total profit coming in at 41.37 billion rupees ($436.14 million).

Material costs, meanwhile, climbed 15% with ITC citing "sharp input cost escalation."

Total revenue, however, climbed 46% to 283.18 billion rupees for ITC — which is also home to the Sunfeast and Aashirvaad brands — as strong demand for consumer goods and higher prices put in place to counter commodity inflation helped.

The company said domestic demand across rural and urban markets was resilient, even as it warned that deficient and uneven monsoons and strengthening El Nino conditions could pose risks to agricultural output and inflation.

Key rivals and bellwethers Hindustan Unilever HLL.NS and Nestle India NEST.NS have also flagged commodity inflation.

ITC shares have lost more than a third of their value in the past year, compared with a 9% drop in the benchmark Nifty 50 index .NSEI. The stock closed marginally higher ahead of the results.

($1 = 94.8550 Indian rupees)