CTC 4Q net slips 8% to Rs.1.8bn over lower top line and higher expenses

The local unit of British American Tobacco PLC, Ceylon Tobacco Company PLC (CTC), which has a monopoly in cigarette products in Sri Lanka saw its December quarter (4Q15) net profit slipping 7.7 percent year-on-year (yoy) to Rs. 1.8 billion amid a slowdown in revenue and higher operating costs, the interim financials showed. 

The earnings per share (EPS) for the quarter ended lower at Rs. 9.79. The share however closed the week Rs.19.80 or 1.97 percent higher at Rs. 1,024.10. 

CTC is now the most valued company in the Colombo Stock Exchange with a value tag of Rs.191.4 billion consisting of 7.66 percent of the total market, slightly above market heavyweight John Keells Holdings PLC which has a market capitalization of Rs.189 billion (7.55 percent). The gross revenue slowed to Rs.23.70 billion from Rs.23.74 billion during the corresponding quarter in 2014. However the net revenue – after levies to the government – edged up 2.3 percent yoy to Rs. 5.96 billion. 

The total operating costs rose 14.7 percent yoy to Rs. 2.85 billion. 

Meanwhile, for the year ended December 31, 2015 the company posted a net profit of Rs. 10.6 billion, up 23.3 percent. The EPS was Rs.56.77. The gross revenue rose 21.2 percent to Rs. 106.5 billion. “Top line growth for the 12 months ended 31st December was primarily driven by excise led price increases in October 2014 and October 2015, coupled with recovery in volumes during 2015 driven by mainstream and premium segments. 

However, under regulated and low taxed products such as ‘Beedi’ still remains a key threat to government revenue contribution from the tobacco industry,” the company said in an earnings release. 

Being the country’s highest tax paying listed entity, the company paid Rs.87.8 billion in regular taxes and levies in 2015, up Rs.15.6 billion in 2014. 

Besides, during the 4Q15 the company paid a hefty Rs.3.8 billion on account of the one-off Super Gains Tax (SGT) in three installments. With the SGT, the total taxes and levies paid by CTC in 2015 amounted to  Rs.91.6 billion.

However, the company said it remained committed to future investments in key brands, “with a predominant focus on infusing value into the main-stream brand, John Player Gold Leaf”. 

The Prime Minister, Ranil Wickremesinghe last week said the government was considering capital tax 
to create equality but such as tax could discourage future investments and impact negatively on 
labour productivity. 

Meanwhile, the company said the law enforcement agencies in 2015 had nabbed Rs. 648 million worth of contraband fags by conducting 1,819 raids. 

A final dividend of Rs.3.70 a share has been recommended by the directors payable on the April 11, 2015 upon shareholder approval. The interim dividends paid amounted to Rs.7.6 billion in 2015.