The sales at Sri Lanka’s monopoly cigarette player, Ceylon Tobacco Company PLC (CTC) fell during the September quarter (3Q19) due to Excise-led price increases and Easter Sunday bombings in April, which slowed consumer spending and tourist arrivals to the country.
CTC in an earnings release said sales volume fell 11 percent year-on-year (YoY) during the quarter under review, albeit slower than the 21.5 percent YoY decline recorded in the previous quarter. The government increased Excise duty on legal cigarettes during August 2018 and March 2019.
For the three months under review, CTC recorded earnings of Rs.24.09 per share or Rs.4.5 billion compared to earnings of Rs.19.46 per share or Rs.3.6 billion.
The revenue improved to Rs.35.3 billion from Rs.33.1 billion a year ago.
The revenue CTC coughed up for the government during the period by way of excise and other levies increased by Rs.800 million to Rs.26.3 billion.
For the nine months ended September 30, 2019, CTC paid Rs.79.9 billion as government levies compared to Rs.83.2 billion paid for the same period last year.
CTC said the growth in low taxed products such as beedi and illegally smuggled cigarettes remains a key threat to the turnover of the legal industry and its contribution to the government revenue.
“The smuggled illegal cigarette consumption in Sri Lanka is growing exponentially due to the ever-widening price gap between legal and smuggled cigarettes with regular price hikes targeting the legal product,” the CTC earnings release said.
However, the government reduced the Excise duty on cigarettes measuring between 67mm-72mm by Rs.4.60 per stick, with effect from October 15, 2019.
The cigarettes measuring between 67mm-72mm include cheaper brands catering to the lower-end of the market.
A gazette declared that the excise duty imposed on a batch of 1,000 cigarettes measuring between 67mm-72mm would be reduced to Rs.33, 000 from Rs.37, 600.
The directors of CTC recommended a third interim dividend of Rs.21 per share to be paid by November 28, 2019.
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.