Sri Lanka’s Ceylon Tabacco to close two leaf depots

Jan 31, 2017 (LBO) – Sri Lanka’s Ceylon Tobacco Company PLC (CTC) announced that it will be closing its leaf depots situated in Anuradhapura and Sigiriya due to the impact of tax hikes despite an increase in profits reported last year.

“It is no secret that the excise and VAT hikes in October and November last year, which led to a 43 percent price increase in legally manufactured cigarettes, had an impact on our business and manufacturing operations in Sri Lanka,” said Michael Koest, managing director and chief executive officer of CTC.

“We have, on several occasions, highlighted that any impact on our business would have a ripple effect on the livelihoods supported across our value chain.”

In December 2016 the company announced that it was considering the closure of four leaf depots, due to the drop in demand for tobacco leaf as a result of declining volumes.

In the first phase CTC will wind down operations in Anuradhapura and Sigiriya starting with the closure of the two leaf depots.

Shutting down the two depots is estimated to impact the livelihoods of approximately 2,000 persons depending on tobacco farming, who stand to lose close to 200 million rupees in annual income.

The company also underwent a 20 percent head count reduction at the start of 2017 as a result of reducing one shift at its Colombo Factory.

Currently CTC directly and indirectly employs over 46,000 persons and supports around 300,000 livelihoods at various stages of operations from farming tobacco to the distribution and sale of its products, the company said.

“We source all our tobacco leaf locally from over 20,000 farmers and infuse around 2 billion rupees to the rural economy annually through our farming activities alone,” Koest says.

“We partner with these farmers and guarantee the purchase of their full crop at a pre-agreed competitive price. We are concerned that the impacts faced by our business will have far reaching impacts on the local communities and rural economies dependent on the legal tobacco industry.”

According to statements filed with the Colombo Stock Exchange, CTC reported profit after tax of 10.58 billion rupees for the nine months ended 30th September last year, up from 8.8 billion rupees during the same period the previous year.

CTC reported full-year net profits of 10.6 billion rupees in 2015, up from 8.6 billion rupees in 2014.