Ceylon Tobacco unit profits up 8-pct in Dec despite volume drop

Feb 28, 2017 (LBO) – Profit after tax at Ceylon Tobacco, a unit of British American Tobacco, rose 8 percent to 2.0 billion rupees in the December quarter, interim accounts showed.

The firm reported earnings of 10.58 rupees per share for the fourth quarter compared to earnings of 9.79 rupees per share posted a year ago.

Gross revenue rose 4 percent in the quarter to 24.7 billion rupees and after deducting government levies, the unit reported net revenue of 7.6 billion rupees for the quarter, up 27 percent a year ago

Excise special provision tax of the government dropped 17 percent to 14.8 billion rupees while value added and other tax introduced in the quarter was 2.4 billion rupees.

Other operating expenses doubled in the quarter to 3.3 billion rupees and income tax expense closed flat at 1.4 billion rupees in the quarter.

In the 12 months to December 2016, the firm reported earnings of 67.05 rupees per share compared to earnings of 56.77 rupees per share posted a year ago on total profits of 12.6 billion rupees, up 18 percent.

Ceylon Tobacco has paid 87.4 billion rupees to the Government in the form of excise tax during the twelve months ended 31 December 2016 driven primarily by relatively stable volumes during the first 9 months of the year.

The company said the significant price hikes in the 4th quarter due to both an excise increase in October and the introduction of 15 percent VAT in November, caused volumes to halve.

“Government revenue through excise declined by 13.2 billion rupees compared to the 3rd quarter of the year,” Ceylon Tobacco said.

“It is anticipated that these price hikes will continue to impact both CTC volumes and government revenue during 2017.”

The company said as a result of the business impact, the company closed 2 leaf depots and reduced factory shifts by a third, in early 2017.

The company added that there was a significant increase in overhead expenditure in 2016 due to the obligations of key business partners and the increase in marketing investment.

“Raw material costs increased by 10 percent through the rise in imported tobacco leaf required as a consequence of continued adverse weather conditions in addition to farmers being pressured to stop cultivating tobacco.”

The Directors recommend a final dividend of 6 rupees per share for 2016 subject to shareholders approval of the AGM to be held on 25th April 2017.

The final dividend will be payable on 5th May 2017, once approved by the shareholders.

Principal operations of the Ceylon Tobacco Company are manufacturing, marketing and selling cigarettes.

The ultimate holding company of Ceylon Tobacco is British American Tobacco through British American Tobacco Holding (Sri Lanka) BV.