COLOMBO: Sri Lanka Ceylon Tobacco Company’s profit after tax (PAT) stood at Rs. 3.19 billion for the three months ended 31 March 2017, the company said in its Summary of Performance report. The significant price hikes in the 4th quarter of 2016 due to the excise increase in October and the introduction of 15% VAT in November, resulted in volumes of 1st quarter 2017 decline by 29% vs same period last year. It is anticipated that these price hikes will continue to impact both CTC volumes and government revenue from CTC during the remainder of 2017. Ceylon Tobacco Company’s contribution to the Government Revenue through Excise for the first quarter of 2017 was Rs. 19.7 billion, which is an 11.1% reduction compared to the first quarter of 2016. Historical Compound Annual Growth Rate of 13.0% delivery of Government Revenue will not materialize in the current year, the CTC said.
As a result of the business impact of the price increases, the Company noted a 4.9% reduction in net turnover vs. same period last year. However, the Company’s focus on its cost base having closed two leaf depots, and reduced factory shifts by a third, negated the turnover impact to record an increase in profit for the period vs. same period last year. Consequently, the Company focused on strengthening the value proposition of key brands and route to market infrastructure. Significant expenditure has been incurred due to the increased levels of unlawful enforcements in the market which pose a greater challenge to the business considering the recent price hikes. Law enforcement agencies continued to work towards curtailing the spread of unauthorized and illicit tobacco products. A total of 35mn illicit cigarettes at a market value of RS. 1.7 billion were seized during 1st quarter of 2017, a significant increase, since the price hikes. However, under-regulated and low taxed products such as “Beedi” remain a key threat to Government revenue from the tobacco industry due to widening price gap between the cheapest legally manufactured cigarette (Capstan) and Beedi. The Directors recommend a first interim dividend of Rs. 15.00 per share to be paid by the 30th of May 2017.