CTC reports higher top and bottom-lines but cries over higher levies

Ceylon Tobacco Company PLC (CTC) reported higher top and bottom-lines but said the repeatedly raised excise duty and other taxes continue to weigh on both the growth in the number of sticks that they sold while the inflation sent the raw material prices higher.  

Sri Lanka’s sole licensed fag maker sold 487 million in sticks in the three months through September, up from 473 million in the same period last year, according to the figures disclosed by the company in the interim report for September.

But the volumes for the nine months through September declined from 1,743 million to 1,395 million sticks as rising prices hit the demand.

Quarterly volume sales showed that the demand is back up again after initially sending it down by the smokers in response to the repeatedly raised prices.

The company meanwhile reported a turnover measured prior to government levies of Rs.52.15 billion for the quarter, up 16.5 percent from the same period last year.

Meanwhile, what they refer to as revenue, net of government levies came in at Rs.15.93 billion for the same three months, staging a 20.5 percent increase over the same period last year.

The company paid levies applicable on sales to the tune of Rs.36.22 billion, up from Rs.31.54 billion a year ago, bringing the total levies for the nine months to Rs.102.66 billion, little lower from Rs.106.35 billion in the corresponding period in 2023.

The company paid income tax of Rs.5.16 billion for the quarter and Rs.14.85 billion for the nine months, both up from the comparable periods last year.

As the Sri Lankan economy came to a grinding halt after running out foreign currency in 2022, the government raised the excise duty on cigarettes and other taxes repeatedly to generate revenue for the government under the revenue based fiscal consolidation programme of the International Monetary Fund.

However, CTC continued to claim that due to these higher taxes which in turn pushed up the prices of cigarettes, turning smokers to both beedi and illicit cigarettes, losing government of the revenues which otherwise would have generated from the legal industry.

“Due to excessive price increases, the illegal or smuggled cigarette share has increased in the market significantly in 2024”, CTC said in its earnings release for September.

Meanwhile, the revenue has also been supported by exporting of tobacco leaf which the company said partially mitigated the loss in overall turnover.

In the meantime, raw material costs rose by 26.1 percent to Rs.826 million while the other operating expenses jumped by 78.3 percent to Rs.1,615 million.

The company reported earnings of Rs.41.21 a share or Rs.7.72 billion for the quarter, compared to Rs.36.68 a share or Rs.6.87 billion in the year earlier period.

The company declared its third interim dividend of Rs.40.90 a share to be paid by November 26, reflecting the company’s near 100 percent payout ratio.

British American Tobacco International Holdings B.V. held 84.13 percent stake in CTC while Philip Morris Brand SARL had 8.32 percent. Employees Provident Fund has 0.17 percent stake being its seventh largest shareholder.