Cigarette sales on path to recovery following sharp volume decline

Sri Lanka’s monopoly cigarette player, Ceylon Tobacco PLC (CTC) says cigarette sales are set for a pre-pandemic level recovery after recording sharp 38 percent year-on-year (YoY) decline in volumes during the June quarter (2Q20).

CTC’s revenue slipped by  35.2 percent YoY to Rs 5.53 billion in the quarter owing to COVID-19 pandemic related lockdown measures that lasted until mid May and the pandemic’s impact on national and individual economies of consumers. 

In particular, CTC’s sales were impacted due to product access restrictions faced by consumers and retailers as a result of the island wide curfew imposed to contain the COVID-19 pandemic from late Mach to mid-May.

Amid product access restrictions, certain suppliers and retailers sold tobacco products at inflated prices in the market during the lockdown period. 

In addition, the company’s net finance income was also adversely impacted by the constant rate cuts on deposits, which saw Rs 0.2 billion decline in the quarter. 

Consequently, the company’s net profit slumped by 33 percent YoY to Rs 3.1 billion or Rs. 16.25 earnings per share in the quarter.

In addition, CTC’s contribution to State coffers through Excise and other levies fell by 33 percent YoY to Rs. 24.1 billion in the quarter. 

However, the company remains cautiously optimistic of future sales amid faster than anticipated recovery in cigarette sales after June. 

“Post June, the business recovery is reverting to nearly pre COVID-19 levels encouragingly faster than anticipated, and the business is cautiously optimistic of the future in anticipation of revival of the economy,” CTC said. In addition, the company noted that it has marketing plans in place during the second half of the year and it is constantly reviewing the cost base to enhance profitability and ensure sustainable value to shareholders.

British American Tobacco Holdings (Sri Lanka) BV holds 84.13 percent stake in CTC, while the world’s largest cigarette maker, Philip Morris, has 8.32 percent stake in CTC, being the second largest shareholder. 

The directors of CTC have recommended a second interim dividend of Rs. 15.00 per share to be paid by September 4th this year.