CTC 3Q goes up in smoke as lockdowns hit cigarette sales

The pandemic related restrictions in place during the second half of the quarter ended in September (3Q21) had a substantial bearing on both revenues and profits of Ceylon Tobacco Company PLC (CTC), the interim financial accounts released to the Colombo Stock Exchange showed.

The company reported revenues of Rs.31.7 billion in its fiscal third quarter ended in September, down 28.9 percent from the same period last year while the earnings fell by 22.8 percent to Rs.3.8 billion or Rs.20.32 a share compared to earnings of Rs.26.33 a share in the year ago period. 

“The company’s performance in the three months ended 30th September 2021 was impacted by movement restrictions imposed from mid August till end of September on account of the Covid-19 pandemic third wave,” CTC said.

However, the September quarter last year was somewhat an outlier as the company’s sales reached a quarterly high of Rs.44.6 billion when the economy quickly bounced back with the ending of lockdowns in May last year, benefitting all listed entities, with few exceptions, from the strong pent-up demand. 

CTC is also into exports but doesn’t typically provide the breakdown of its sales figures between its geographical market segments.  

In the nine months to September, the company reported earnings of Rs.62.14 a share or Rs.11.6 billion on revenues of Rs.96.5 billion, down 2.8 percent and 6.3 percent respectively from the comparable period in 2020. 

“Consequently, the company’s overall sales volume, turnover and government revenue through Excise and other levies reduced in comparison to the same period last year,” CTC said.  Ceylon Tobacco is among a group of largest tax payers to the government and during the three months the taxes and levies on turnover fell by about Rs.10 billion or 29.5 percent over the same period last year to Rs.23.7 billion while the corporate income tax expense fell by Rs.1.18 billion or 33 percent to Rs.2.4 billion.   Due to the challenging market conditions, which constrained the company’s ability to stretch its full revenue potential, the company resorted to manage its cost base at an optimal level possible as seen from the considerable decrease in other operating expenses and employee benefit expenses in order to minimise the impact on the bottom line.  “The company managed to continuously review its cost base for optimisation to deliver profitability and sustainable value to its shareholders,” CTC said. Despite the subdued performance, the company which is among a very few generous dividend payers recommended its third interim dividend of Rs.15.0 a share, payable on December 10.  British American Tobacco International Holdings BV and Philip Morris Brand SARL hold 84.13 percent and 8.32 percent stake each in Ceylon Tobacco Company PLC.