Volumes at CTC continue to pick up during 2Q

• Net profit up 47% to Rs.4.3bn
• Pays Rs.30.2bn to govt. in taxes

Volumes continued to pick up at Sri Lanka’s monopoly cigarette player, Ceylon Tobacco PLC (CTC), with the company generating higher revenues and profits for shareholders and taxes for the government, which could be largely credited to price stability. 

CTC said its cigarette sales during the Mach-June quarter (2Q18) increased by 2.3 percent with a 6 percent increase in domestic sales volumes in comparison to the same period, last year.

As a result, the gross turnover rose little over Rs.2.5 billion to Rs.38.8 billion while the net revenue—after government levies—rose 5.3 percent to Rs.8.7 billion from a year ago.

The company paid Rs.30.2 billion in government levies, by way of excise and other duties, up from Rs.28.1 billion reported for the same period, last year. The cumulative tax figure for the first six months of the year stood at Rs.57.7 billion, up from Rs.51.9 billion.

CTC for the quarter under review also paid income tax to the tune of Rs.2.9 billion, down from Rs.3.1 billion in the corresponding period of the previous year.
The company reported earnings of Rs.23.25 per share or Rs.4.35 billion for the quarter under review compared to earnings of Rs.15.77 per share or Rs.3 billion. This is a 47.3 percent increase in net profit compared to the previous year. 

A recovery in sales volumes was first seen in the first quarter of this year after the 43 percent excise duty increase in the fourth quarter of 2016, which led to substantial price increases. The government last week again increased the excise tax on cigarettes—on 72mm and 84mm long sticks— after a hiatus of about 21 months, but at a benign Rs.3.80 per stick, which led CTC to raise prices of its most popular cigarette brand by Rs.5.

Meanwhile, CTC estimates the smuggled illegal cigarette market in the country at 500 million sticks per annum. The revenue loss to the government from smuggled cigarettes is estimated at Rs.20 billion per annum.

“The trend is expected to grow due to widened gap between the prices of legal and illicit cigarettes available in the market as well as current macroeconomic factors that are impacting consumer spending power,” CTC said in an earnings release.

The law enforcement agencies had carried out 909 raids on smuggled cigarettes during the first half of this year.

Sri Lanka also has a completely unregulated ‘beedi’ market that caters to the lower strata of the society, which according to some is bigger than the regulated cigarette market.

Beedis are awfully cheap, priced at Rs.5.00 a stick—still Rs.15 cheaper than the lowest priced legitimate cigarette in the country. 

 
British American Tobacco Holdings (Sri Lanka) BV holds 84.13 percent stake in CTC. 

The directors recommend a second interim dividend of Rs.19 per share to be paid on August 29, 2018.