CTC puffs a difficult 1Q

• Domestic cigarette volumes down by 14%
• Govt. revenue static at Rs. 15 b; company profit down 1.8% to Rs. 1.4 b

Ceylon Tobacco Company Plc (CTC) has had a difficult first quarter with sales volume and profit down, whilst revenue to the Government was almost static over a year earlier.

The company said it contributed Rs. 15.1 billion to Government revenue in the first three months of 2013 despite challenging economic conditions which resulted in a 14% drop in domestic cigarette volumes over the same period last year. In 1Q of FY12 revenue to Government was Rs. 15.3 billion.

The company’s profit after tax declined only by 1.8% versus same period last year to Rs. 1.46 billion, as the adverse impact of volume drop was largely offset by a better mix, higher export and. Cost saving measures ensured operating expenses remained flat despite high inflationary pressures, CTC said.

While the total volume was down, Dunhill, the premium brand, grew by 25% vs same period last year, driven by its innovative variant Dunhill SWITCH. Export volume has increased by 31% vs the same period last year, increasing export revenue by 77%.

CTC said it would continue its endeavour to improve export performance going forward.

The law enforcement agencies continue to effectively curtail the spread of unauthorised and illicit tobacco products. In the first three months of 2013, a total of 295 raids have yielded 21.5 million illegal sticks saving a potential revenue loss of over Rs. 300 million for the Government, the company said.

CTC also said its flagship CSR initiative, the Sustainable Agricultural Development Program (SADP), continues to alleviate poverty and empower livelihoods of underprivileged families in rural Sri Lanka. The main focus during the 1st quarter was supporting 2,960 farmers in the Kilinochchi, Kandy, Matara and Hambantota Districts.

The company also said it has appealed to the Supreme Court to stay the implementation of Graphic Health Warning Regulations. The Regulations were due to be implemented from 1 March 2013. The Supreme Court has asked both CTC and the Ministry of Health to endeavour to agree to a mutually workable regime.

The next hearing in the case will be on 28 May and implementation of the Regulations has been deferred until that date, pursuant to an undertaking given to the Supreme Court on behalf of the Minister of Health

As a responsible corporate citizen CTC always supports sensible and balanced regulations and will comply with such regulations whilst safeguarding its legal rights.

CTC’s Board of Directors has recommended a first interim dividend of Rs. 7.70 per share and will be paid on 21 May 2013.