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Sri Lanka cigarette sales down 19-pct in Dec quarter after tax hikes says BAT unit

ECONOMYNEXT – Sri Lanka’s legal cigarette sales are fell 19 percent in the December 2019 from a year earlier after tax and price hikes during the year, Ceylon Tobacco Company Plc, a unit of British American Tobacco said.

Ceylon Tobacco said profits fell 33 percent to 4.0 billion rupees in the quarter giving earnings 21.36 rupees per share. Full year earnings were 92.13 rupees per share on total profits of 17.1 billion rupees, which grew marginally from 17.0 billion rupees.

CTC said there was a steep rise in cigarette smuggling.

“With regular tax hikes targeting only legal cigarette sales, the ever-widening price gap between legal and smuggled cigarettes has resulted in price pressured consumers choosing smuggled cigarettes as a cheaper alternative,” the firm told shareholders.

CTC claimed there was “exponential growth” in illegal cigarettes.

Sri Lanka cigarette use has been in long term decline, due to legal restrictions and high prices as well as growth health knowledge.

High taxes are known to encourage smuggling though the extent is not clear.

There is also anecdotal evidence that customers who used to smoke brands such as Three Roses have now switched to beedi, a legal product.

Cigarettes sales also tend to go down after currency collapses.

CTC said revenues including taxes fell to 35.7 billion rupees, from 37.8 billion rupees, reducing taxes for the state.

Net revenues grew to 9.6 billion rupees from 8.6 billion rupees as prices were raised.

Profits fell partly due to a 2.0 billion rupee other operating expense of 1.26 billion rupee came from tax changes, the firm said. (Colombo/Feb26/2020)