ECONOMYNEXT- Ceylon Tobacco Company Plc, the Sri Lankan unit of British American Tobacco, said that its net profits for the June quarter grew 7.5 percent from a year earlier to 4.7 billion rupees amid favourable weather and cost cutting to manage lower sales from an excise duty hike.
Earnings per share for the quarter were 25 rupees. For the 6 months to June, earnings per share were 46.68 rupees. The CTC share closed trading at 1,298.80 rupees on Thursday.
The firm's net revenue for the June quarter fell 6.8 percent to 36.2 billion rupees, while government levies on sales fell 8.6 percent to 27.6 billion rupees, leading to net revenue falling 10.3 percent to 8.6 billion rupees.
CTC, in a earnings statement, said that sales volumes fell due to excise duties on cigarettes being raised in quick succession in August 2018 and March 2019, and low consumer sentiment following the Easter Sunday attack.
Sales volumes of cigarette sticks had fallen 21.5 percent from a year earlier in the June quarter, the firm said.
Raw material costs fell 42 percent to 389 million rupees.
The firm said that with favourable weather, it has sourced more local leaf during the quarter, compared to high importation of tobacco leaf over the past two years due to poor weather.
Sri Lanka had experienced one of the worst droughts of the last 4 decades in 2017 and 2018, which had hit crop growing.
Other operating costs in June fell 31.4 percent to 589 million rupees amidst the firm's continuing efforts to cut costs to maintain profitability.
CTC warned that the growth in low-taxed and illegally smuggled cigarettes are a threat to the firm's sales and profitability.
Sri Lanka’s consumption of smuggled illegal cigarettes is estimated to exceed 500 million sticks annually, the company said.
This situation is expected to escalate as the price gap between the legal and illegal product widens, resulting from constant price hikes targeting the legal product, CTC said. (Colombo/09 Aug/2019)