Cigarette sales drop, but govt.’s revenue up

CTC hopes to work out compromise on graphic health warnings

Despite a 7.3% volume drop in cigarette sales, Ceylon Tobacco Company had contributed Rs.32.7 million in taxes to government coffers in the first half of the current calendar year, the company announced on Friday.

This was a 5% increase in tax revenue despite a 7% volume decline in cigarette sales, the company said. The government last week further increased taxes on cigarettes and alcohol ahead of the budget.

CTC which is one of the highest dividend paying companies quoted on the Colombo Stock Exchange on Friday announced a second interim dividend of Rs.15 per share to its shareholders payable on October 23.

Meanwhile the company which has challenged in Courts the Regulations published by Minister of Health to implement pictorial health warning covering 80% of cigarette packs, hopes to reach a compromise with the ministry over a ``mutually agreeable set of regulations’’ as suggested by the Supreme Court.

The implementation of the Regulations has been deferred following an interim SC order to maintain the status quo until the case is taken up for hearing of CTC’s appeal for a stay order. This is fixed for Sept. 20.

``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.

Despite the price stick, cigarette sale volumes have generally picked up following increase in prices with the company too maximizing the possibilities of taking an industry price increase alongside government’s tax increases, analysts said.

During the six months to June 30, CTC said that its profit after-tax of Rs.4.3 billion had been driven by high revenue, better product mix and higher net interest income stemming from change in the investment strategy made last year.

``The law enforcement agencies continued to effectively curtail the spread of unauthorized and illicit cigarettes. In the first six months of 2013, a total of 492 raids carried out by the enforcement agencies resulted in the confiscation of 40.2 million illegal cigarettes at a market value of LKR 844 million, whereas the total number of cigarettes confiscated during the same period last year was 34 million sticks, CTC said.

``This increase in illicit cigarettes poses a real threat to volume which can adversely impact revenue streams for the company and the Government. It also increases the risk of sub-standard products reaching the consumers.’’

CTC’s flagship CSR initiative, SADP (Sustainable Agricultural Development Programme) in its sixth year, is focusing on supporting 2,576 active farmers in the districts of Kilinochchi, Kandy, Matara & Hambantota in 2013. It also launched SADP Ultra to 4,100 tobacco farmers with an objective of introducing social responsibility in tobacco production (SRTP). SADP continues its voyage of alleviating poverty, supporting a total number of 16,164 families to date, CTC said.

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