CTC’S FINANCIAL PERFORMANCE IN 2017 INDICATES A LKR 18 BILLION DIP IN GOVERNMENT REVENUE

• 2017 sees only a marginal increase in cigarette excise revenue –  total revenue stood at LKR 117.3 bn compared to target of LKR 135 bn
• Smuggled cigarettes booming – 450 mn cigarettes entered illegally in 2017
• Smuggled fags now account for 15% of the legal tobacco industry – GOSL loses LKR 20 bn in revenue due to smuggling

Ceylon Tobacco Company PLC (CTC) says that its contribution to government revenue, through excise, taxes and levies, fell to LKR. 117.3 billion during the year ending 31st December 2017, compared to the LKR. 135 billion targeted during the year. The Company also notes that the dip in its contribution to the state’s coffers is the result of the legal cigarette prices shooting up by 43 per cent following the tobacco excise hike and introduction of 15 per cent VAT during the last quarter of 2016.

In the past, the Government of Sri Lanka had successfully increased its excise revenue from cigarettes, on average, by around 20 per cent year on year, but in 2017 it experienced only a marginal increase of 1.6 per cent over 2016 to LKR. 88.9 billion. The Company’s volumes declined by 18 per cent when compared to 2016, while Net Turnover for the year also declined by 0.2 per cent when compared to the same period last year.

Legally manufactured cigarettes becoming unaffordable to average consumers also led to a booming illicit trade in the country. Smuggled cigarettes entering the country increased over 10-fold in 2017, with 450 million sticks infiltrating the market during the year. Smuggled cigarettes are now estimated to be in the region of 15 per cent of the legal cigarette industry in Sri Lanka, causing a revenue loss of about LKR 20 billion to the Government. The gap between the price of legal and illicit products available in the market coupled together with the current macroeconomic factors impacting consumer spending power have pushed smokers towards such cheaper alternatives, defeating the Government’s public health objectives.

The Company’s financial results also indicated that Profit after Tax stood at LKR 14.58 billion for the year ended 31st December 2017. The Directors recommend a final dividend of LKR 11.80 per share for 2017.