- Taxes to govt. at Rs.29.1 bn in 4Q; Rs.112.4 bn for full year
- Estimates 2018 smuggled cigarette market at 510mn sticks
Sales slowed at Sri Lanka’s monopoly cigarette player, Ceylon Tobacco PLC (CTC), during the December quarter (4Q18), as CTC had to jack up prices of some of its products, as a result of the government hiking taxes in August 2018.
CTC said that led to a 3.2 percent decline in volumes during 4Q18 compared to the same period, last year.
Higher cigarette prices however saw the company recording a turnover of Rs.37.8 billion compared to Rs.35.1 billion reported for the same quarter a year ago.
Total indirect taxes to the government from CTC, excluding income taxes, for the quarter under review rose to Rs.29.1 billion from Rs.27.4 billion a year ago.
The company earnings for the December quarter improved to Rs.28.11 per share or Rs.5.3 billion compared to Rs.24 per share or Rs.4.5 billion a year ago.
Meanwhile, for the year ended December 31, 2018 (FY18), CTC reported earnings of Rs.90.77 a share or Rs.17 billion compared to earnings of Rs.77.87 a share or Rs.14.6 billion reported for FY17.
The sales for the FY18 rose to Rs.145.3 billion compared to Rs.138.5 billion a year ago.
Total indirect taxes to the government from CTC, excluding income taxes for FY18 was Rs.112.4 billion compared to Rs.107.4 billion in FY17.
CTC experienced a recovery in sales during the first two quarters of this year, after the 43 percent excise duty increase in the fourth quarter of 2016, which led to substantial price increases.
After a hiatus of about 21 months, the government announced a Rs.3.80 per stick excise duty increase with effect from August 21, 2018, on 72mm and 84mm cigarettes, which led CTC to raise the prices of its most popular cigarette brand by Rs.5.00.
This resulted in a 14.2 percent volume decline in 3Q18.
CTC noted that the growth in low-taxed products such as ‘beedi’ and smuggled illicit cigarettes remained a key threat to government revenue contribution from the regulated tobacco industry.
CTC estimates the smuggled illegal cigarette market of the country in 2018 at 510 million sticks and the beedi market at 4.8 billion sticks.
Beedi is awfully cheap, priced at Rs.5.00 a stick—still Rs.15.00 cheaper than the lowest priced legitimate cigarette in the country.
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 8.32 percent stake in CTC, being the second largest shareholder.
The directors recommend a third interim dividend of Rs.15.77 per share for 2018, subject to the approval of the shareholders at the Annual General Meeting to be held shortly.