Smokers cough up Rs.117.3bn to govt. in 2017

The monopoly cigarette player, Ceylon Tobacco Company PLC (CTC), has paid Rs.117.3 billion to the state in excise, taxes and levies in FY17, compared to Rs.98.3 billion in FY16, the financial accounts released to the Colombo Stock 
Exchange showed.

However, CTC maintains that the government could have milked Rs.135 billion in total taxes in FY17, if not for the 43 percent cigarette price increase and 15 percent value-added tax (VAT) that were effected in the fourth quarter of 2016.

“In the past, the Government of Sri Lanka had successfully increased its excise revenue from cigarettes, on average, by around 20 percent year-on-year (YoY) but in 2017, it experienced only a marginal increase of 1.6 percent over 2016 to Rs.88.9 billion,” CTC said in a statement to the press. The company saw its gross revenue for the year surging to Rs.139 billion from Rs.121.5 billion in FY16 but the net revenue—revenue after government levies—edged down 0.3 percent YoY to 
Rs.31.6 billion. 

CTC said the volumes fell 18 percent YoY “due to the persistent pressure on the disposable income of consumers following the excise increases and introduction of VAT in the fourth quarter of 2016.”
However, the net profit for FY17 grew healthily to Rs.14.5 billion, compared to Rs.12.6 billion a year ago. The earnings per share (EPS) improved to Rs.77.87 from Rs.67.05.

For the December quarter (4Q17), CTC reported a net profit of Rs.4.5 billion compared to Rs.2 billion in the corresponding quarter of the previous year on a gross revenue of Rs.35.6 billion, up from Rs.22.4 billion.

The net revenue for the quarter also improved to Rs.8.2 billion from Rs.7.6 billion. The EPS for the quarter stood at Rs.24.01, up from Rs.10.58.

CTC paid Rs.29.5 billion to the state in excise, taxes and levies during 4Q17, compared to Rs.16.2 billion in the same quarter of previous year.

Meanwhile, CTC cautioned that legally manufactured cigarettes becoming unaffordable to the average consumers also led to a booming illicit trade in the country.  “Smuggled cigarettes entering the country increased over 10-fold in 2017, with 450 million sticks infiltrating the market during the year. Smuggled cigarettes are now estimated to be in the region of 15 percent of the legal cigarette industry in Sri Lanka, causing a revenue loss of about Rs.20 billion to the government,” the CTC press statement said.

“The gap between the price of legal and illicit products available in the market coupled together with the current macroeconomic factors impacting consumer spending power have pushed smokers towards such cheaper alternatives, defeating the government’s public health objectives,” it added.

CTC, being one of the top three companies in the Colombo bourse with a market capitalization of over Rs.204 billion, is controlled by British American Tobacco Holdings (Sri Lanka) BV with a holding of a 84.13 percent stake in the company as at December 31, 2017. 

The directors recommend a final dividend of Rs.11.80 per share for 2017.