Sri Lanka Tobacco Firm Net up 17-pct despite Volume Drop  

Source from:  Lanka Business Online  08/05/2013

Sri Lanka's Ceylon Tobacco Company Plc, a unit of British American Tobacco said profits rose 17 percent to 2.8 billion rupees in the June 2013 quarter, as revenues also gained, despite a volume drop as prices were hiked. 

The firm reported earnings of 15.07 rupees per share, interim accounts showed. In the six months to June the firm reported earnings of 22.88 rupees on total profits of 4.2 billion rupees.
The stock closed at 1,200 rupees Friday.

Gross revenues with state taxes rose 11 percent to 23.0 billion rupees in the June quarter from a year earlier and net revenues rose 12.3 percent to 5.4 billion rupees.

In the six months to June revenues rose 5.5 percent to 42.8 billion rupees after a price hike and net revenues after state turnover based levies rose at a faster 8.0 percent to 10.07 billion rupees, indicating a gain in pricing.

Cigarettes which are highly addictive and have no close substitutes are said to have 'inelastic' demand, where a price hike brings greater revenues despite a volume drop.

CTC told shareholders that volumes in the first six months of the year had dropped 7.3 percent but 32.7 billion rupees in tax revenues went to the state, up 5 percent from a year earlier.

The firm said sales of its upmarket brand Dunhill rose 7.0 percent from a year earlier, helped by Dunhill Switch, a brand variant.

Prices were again raised on July 31 with a tax increase with short cigarettes going up by 2 rupees and longer ones by 3 rupees. But Dunhill was raised by 4 rupees.

The firm said authorities made 492 raids in the first six months of 2013, netting 40.2 million illicit cigarettes worth 844 million rupees, up from 34 million sticks a year earlier.

"This increase in illicit cigarettes poses a real threat to our volume which can adversely impact revenue streams for the company and the Government," the firm said.

The company said illicit cigarettes increased "the risk of sub-standard product" reaching consumers, without elaborating whether "sub-standard" product increased or decreased health risks or mortality of users.

The firm said it was continuing to fight new labeling laws brought by health authorities.
Sri Lankan health authorities have proposed developed-country style graphic labeling to warn customers of cancer, heart disease and other risks from cigarettes.

Sri Lanka's Supreme Court is to take up the case on September 20 again.

"In the interim, as directed by the Supreme Court, CTC will endeavor to reach a compromise with the Ministry of Health with regard to a mutually agreeable set of Regulations," the company said. Enditem