Govt. revenue from tobacco intact; CTC earnings under attack

Tuesday, 8 May 2012 01:17 - - {{hitsCtrl.values.hits}}

The Government revenue from taxing tobacco has remained intact following hikes in taxes, whilst Ceylon Tobacco Company Plc (CTC) earnings have dipped in comparison to recent quarters.

In the first quarter ended on 30 March 2012, Government levies amounted to Rs. 15.29 billion, up by Rs. 1.2 billion from Rs. 14 billion a year earlier and marginally up from Rs. 15.11 billion from the fourth quarter of 2011. Excise revenue from tobacco formed the bulk with Rs. 12.99 billion followed by VAT amounting to Rs. 2.19 billion.

CTC said in addition, the ongoing effective efforts by authorities to curb the illicit trade strengthened the Company’s performance, with 129 raids conducted over the first three months confiscating over 17 million contraband sticks valued at Rs. 408 million. Despite buoyancy in Government revenue, CTC’s net profit appears under stress. In first quarter it was Rs. 1.48 billion, though up by 82% over a year earlier, it is down from Rs. 1.95 billion in the last quarter of 2011. In the three successive quarters since the 2nd quarter of 2011, C TC’s bottom line has been in the range of Rs. 1.81 to Rs. 1.98 billion.

CTC said the major driver of profit during the period was a 37% reduction in Other Operating Expenses compared to Same Period Last Year (SPLY). The reduction in Operating Expenses was primarily driven by one-off factors including: a) timing difference of its CSR expenses related to SADP initiatives, b) no gratuity provision in Q1 2012 since there is a recognised surplus in the defined benefit plan as per the actuarial valuation carried out in January 2012 and c) benefits from cost saving initiatives.

“It is however expected that the gap in operating expenses versus SPLY will reduce in the next quarters as the timing variance in expenses will get adjusted,” CTC added.

CTC Directors have recommended a first interim dividend of Rs. 7.90 per share and will be paid on 25 May 2012.

The Sustainable Agricultural Development Program (SADP), the flagship CSR program of CTC, continues to uplift the lives of people in the rural villages who live below the poverty line.

The total number of families in this program has now grown to 10,664 or 37,534 persons across 12 districts, out of which 7,296 families or 26,481 persons have successfully completed the project and is enjoying the benefits of reaching economic self-sufficiency in a sustainable manner. In 2012 it is planned to extend the project to 1,800 families, out of which 1,000 families will be selected from the north.