The sales at Sri Lanka’s monopoly cigarette player, Ceylon Tobacco PLC (CTC), fell during the June quarter (2Q19) due to two Excise-led price increases in a span of eight months and Easter bombings in April, which slowed consumer spending and tourist arrivals to the country. The government increased Excise duty on legal cigarettes during August 2018 and March 2019.
CTC said its cigarette sales fell 21.5 percent during the quarter under review from a year ago and as a result, the firm’s turnover fell by Rs.2.6 billion to Rs.36.2 billion.
The revenue CTC coughed up for the government during the period by way of Excise and other levies also fell by Rs.2.5 billion to Rs.27.6 billion.
The profit of the company however improved to Rs.4.68 billion, from Rs.4.3 billion “due to continuous efforts in managing the cost base, while focusing on the right investments sustainability,” CTC said in an earnings review.
“It is anticipated that the government’s tax-led price increase will continue to impact the legal industry volumes for the remainder of the year, together with lower consumer spending power stemming from the current macroeconomic factors,” it added.
CTC continued to maintain that growth in low-tax products such as beedi and illegal smuggled cigarettes remain a key threat to its turnover and its contribution to the government revenue.
“The smuggled illegal cigarette consumption is estimated to exceed 500 million sticks annually and it is well poised to grow exponentially due to the ever-widening price gap between the legal and smuggled cigarettes with regular price hikes targeting the legal product,” CTC said.
Meanwhile, for the first half of the financial year (1H19) CTC reported a turnover of Rs.70.5 billion, down from Rs.74.4 billion a year ago.
The company paid Rs.53.6 million in government levies during the six months, down from Rs.57.7 million paid for the same period, last year.
The net profit for the period was Rs.8.7 billion, up from Rs.8.09 billion a year ago.
British American Tobacco Holdings (Sri Lanka) BV holds an 84.13 percent stake in CTC, while the world’s largest cigarette maker Philip Morris has an 8.32 percent stake in CTC, being the second largest shareholder.
The directors of CTC recommended a second interim dividend of Rs.20 per share to be paid by August 29, 2019.