CTC says drop in 1Q sales due to tax-led price increases

Monopoly cigarette player Ceylon Tobacco Company PLC (CTC) yesterday said that its sales volume for the first quarter ended on March 31, 2024 was lower in comparison to the same period last year, mainly due to the tax-led price increases, in line with the government’s revenue proposals.

The company recorded a turnover of Rs.45.8 billion, down from Rs.46.9 billion recorded in the year before.

CTC recorded a revenue of Rs.14.15 billion for the period under review, which is a 11.3 percent increase year-on-year (YOY) but a contraction of 19.6 percent from the previous quarter. In a brief note accompanying the interim financial accounts, CTC said its cost base is impacted by the increase in raw material cost, driven through inflation and the appreciation in foreign currency.

CTC’S profit before tax for the quarter ended in March stood at Rs.11.7 billion, a marginal increase from Rs.10.1 billion recorded in the corresponding period in 2023.

The company saw its profits increase by 13.4 percent YOY to Rs.6.8 billion. When compared with the previous quarter, the earnings have contracted by 20.3 percent YOY. The earnings per share increased to Rs.36.66, up from Rs.32.03 in the corresponding period in 2023.

The Directors of CTC recommended a first interim dividend of Rs.32.70 per share, to be paid by May 31, 2024.

British American Tobacco holds an 84.13 percent stake of CTC while Philip Morris has an 8.32 percent stake in the company, as its second largest shareholder. CTC Chairman Suresh Shah told the company’s shareholders in the latest annual report that the escalating taxes and ensuing sharp increases in the price of legal cigarettes have given rise to a surge in the illicit trade.

“Low levels of infrastructure currently available for enforcement and insufficient penalties also continue to exacerbate the problem,” Shah told the company’s shareholders in the latest annual report.

The loss to state coffers, due to illicit cigarettes, was estimated at Rs.79 billion in 2023, according to a research cited by CTC.