Taxing fags bring Govt. Rs. 71.2 b in revenue

Government earnings from tobacco in 2012 stood at Rs. 71.2 billion, up Rs. 5.1 billion over 2011.

Despite a significant drop in cigarette volumes of 4.3% during 2012, Ceylon Tobacco Company delivered a profit after tax of Rs. 8.2 billion, up 26% over 2011.

•  CTC reports 4.3% dip in volume in 2012 but earnings by Treasury up Rs. 5.1 b
• CTC’s premium category sales grew by 45%
• CTC’s export volumes up 182% to Rs. 128 m
• Net profit up 26% to Rs. 8.2 b; Dividends up by 30% or Rs. 10.55 to Rs. 45.15 per shareThe macro-economy turned 2012 into a year fraught with challenges for CTC and industry as a whole, as high inflation, drought and rising energy costs impacted cigarette volumes after two consecutive years of growth.

The company’s performance was driven by its continuous cost-savings initiatives, exchange gains, higher rates of interest and savings realised from employee benefit expenses in the aftermath of a restructuring undertaken in 2011. In addition, CTC’s export volumes grew by a massive 182% increasing revenues to Rs. 128 million, prompting enhanced interest in expanding its overseas trade.

Despite the dip in overall volumes, CTC’s premium category grew by 45% spearheaded by the innovative new variant, Dunhill SWITCH, which now counts for almost 50% of the premium trade. Dunhill SWITCH, the first capsule product in the South Asian region was launched in December 2011. Market leader, John Player Gold Leaf, recorded a drop of 5% in volumes in 2012.

As demonstrated in previous years, law enforcement authorities continued their commendable efforts to contain the spread of unauthorised products and illicit cigarettes from entering the market, resulting in the loss of over a billion rupees in revenue to government. Sri Lanka remains a lucrative destination for smugglers of illicit cigarettes, and in 2012 authorities confiscated over 56 million sticks valued at over Rs. 1.35 billion.  CTC’s flagship CSR initiative, the Sustainable Agricultural Development Program (SADP) completed yet another successful year, alleviating poverty and empowering livelihoods of underprivileged families in rural Sri Lanka.

The total number of families benefitting under the SADP program grew to 11,864 in 2012, enriching the lives of 44,309 Sri Lankans island wide. A total of 8,071 families have successfully graduated from the program and are enjoying the benefits of economic self-sufficiency.

Ceylon Tobacco Company filed a writ application in the Court of Appeal in November 2012 challenging the Tobacco Products (Labelling and Packaging) Regulations No. 01 of 2012 published by the Minister of Health in the Gazette Extraordinary No. 1770/15 dated 8 August 2012.

The Regulations were originally due to be implemented with effect from 8 November 2012. On 8 November 2012, Ministry of Health extended the implementation date until 1 March 2013. After the hearing on 15 January 2013, the Court of Appeal decided to proceed with the case and ordered the Respondents to file their Objections on or before 19 February 2013.

CTC has requested Court to issue an interim order staying the operation of the Regulations until the conclusion of the case. The case will be taken up in Court again on 19 February 2013.

The Directors recommend a final dividend of Rs. 6.50 per share less tax for 2012. The final dividend is subject to the approval of the shareholders at the Annual General Meeting to be held on 28 March 2013.

Once approved by the shareholders, the final dividend will be payable on 9 April 2013.

Four interim dividends totalling Rs. 37.10 less tax and a special dividend of Rs. 1.55 Less tax have been declared and paid already for 2012.