Sales at Sri Lanka’s monopoly cigarette player, Ceylon Tobacco PLC (CTC), fell during the December quarter (4Q19) due to two Excise-led price increases within a period of eight months.
The government increased excise duty on legal cigarettes in August 2018 and March 2019.
CTC said its cigarette sales fell 19 percent during the quarter under review from a year ago, and as a result, the firm’s turnover fell to Rs.35.6 billion from Rs.37.8 billion a year ago.
The revenue CTC coughed up for the government during the period by way of excise and other levies also fell by about Rs.3.2 billion to Rs.25.9 billion.
CTC recorded earnings of Rs.21.36 per share or Rs.3.9 billion for the quarter under review compared to earnings of Rs.28.11 per share or Rs.5.3 billion for the corresponding period of the previous year.
CTC said the reduction in profits were largely due to a reported reduction of other operating expenses in the fourth quarter of 2018 arising from a reduction in constructive liability of CTC’s key business partners with regard to changes in tax regime over the past few years.
Meanwhile, for the full year ended December 31, 2019, CTC recorded a turnover of Rs.141.3 billion, down from Rs.145.3 billion in FY18.
The company’s after-tax profit for FY19 remained flat at Rs.17.2 billion.
The firm paid Rs.105.8 billion in government levies during the FY19, down from Rs.112.4 billion in FY18.
CTC continued to maintain that smuggled cigarettes remain a key threat to its turnover and its contribution to the government revenue.
“With regular tax hikes targeting only legal cigarettes, the ever-widening price gap between legal and smuggled cigarettes has resulted in price pressured consumers choosing smuggled cigarettes as a cheaper alternative, thereby driving exponential growth in the illegal segment.
“The growth in smuggled cigarettes remains a significant threat to the turnover of the legal industry and government revenue collectively,” a CTC statement said.
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.
CTC directors have recommended a final dividend of Rs.12.3 per share for FY19 subject to the approval of shareholders at the Annual General Meeting to be held on April 30.
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