Sri Lanka’s Ceylon Tobacco Company PLC (CTC) in their latest quarterly financials outline that the Government increasing the Excise duty on cigarettes in August 2018 and March 2019 lead to a price increase of legal cigarettes. As a result, the Ceylon Tobacco Company's sales volume for the second quarter ended 30th June 2019 had reduced by 21.5% in comparison to the same period last year.
The financial further outline that company’s contribution to the Government revenue through Excise and other levies for the second quarter has reduced by Rs.2.6 billion and Rs.2.5 billion respectively in comparison to the same period last year. Further, The Company’s profit after tax stood at Rs.4.68 billion for the three months ended 30 June 2019. Report further outlined that that the Company's continuous efforts in managing the cost base while focusing on right investments for sustainability contributed positively to Profit for the period.
“The growth in low taxed products such as Beedi and smuggled illicit cigarettes remains as a key threat to the turnover of the legal industry and its contribution to the Government revenue” the company said in its financial review adding that the smuggled illegal cigarette in Sri Lanka estimated to exceed 500mn sticks annually and is well poised to grow exponentially due to the ever widening price gap between legal and smuggled cigarettes with regular price hikes targeting the legal product.
The report also noted that the government’s tax led price increase will continue to impact legal industry volumes for the remainder of the year together with lower consumer spending power stemming from current macroeconomic factors.However, despite the volume erosion, the CTC is committed to further strengthen the value propositions of its brands to deliver sustainable results for the government and its shareholders.CTC’s directors had recommended a second interim dividend of Rs. 20.00 per share to be paid on 29th august 2019 according to the financials.