15 November 2017 09:54 am
Ceylon Tobacco Company PLC (CTC), a unit of British American Tobacco, saw its September quarter (3Q17) performance affected by lower volumes due to higher prices of cigarettes following an excise duty increase in fourth quarter, last year.
The net profit for the quarter under consideration fell to Rs.3.9 billion from Rs.4.4 billion in the same quarter last year on revenue of Rs.36.2 billion, down from Rs.39.4 billion a year ago.
The company’s earnings per share, which holds a virtual monopoly on manufacturing and distributing of cigarettes in Sri Lanka, fell to Rs.21.02 from Rs.23.87.
The government levies paid by the company by way of excise duty and Value-Added Tax (VAT) fell slightly to Rs.30 billion from Rs.30.2 billion.
However, for the nine months ended September 30, 2017, the total levies paid stood at Rs.79.9 billion up from Rs.74.9 billion paid in the corresponding period, last year.
The company said the volumes for the first nine months of the year fell 28.7 percent from a year ago as a result of the “legal market contracting due to the persistent pressure on the disposable income of consumers following the excise increase and introduction of VAT in the 4th quarter of 2016.”
According to CTC, unauthorized and illicit tobacco products continued to increase with over 2000 raids being carried out by law enforcement authorities during the year so far, resulting in the detection and seizure of over 40 million illicit cigarettes.
The company said the approximate illicit cigarette market is estimated to be over
360 million.\
“This is driven by the gap between the price of legal and illicit products available in the market as well as current macroeconomic factors that are impacting consumer spending power,” CTC said.
Adding to the woes of CTC is a booming but under-regulated ‘Beedi’ industry, which offers an extremely cheap alternative to cigarettes.
Meanwhile, CTC said to capture some of the lost markets and address consumer affordability it launched mid-length segment in the first week of October, this year. As a result other operating income during the quarter rose 43 percent compared to the same period last year.
The directors recommend a first interim dividend of Rs.17.50 per share to be paid by December 4, 2017.
British American Tobacco Holdings (Sri Lanka) BV holds 84.13 percent of the issued shares of CTC.