ECONOMYNEXT – Sri Lanka’s Ceylon Tobacco Company said its March quarter cigarette sales were down from a year earlier, leading to an absolute revenue fall as well amid tax hikes and an economic slowdown.
Revenue in the March 2024 quarter fell to 45.85 billion rupees, down from 46.93 billion rupees last year.
Turnover linked taxes fell to 31.7 billion rupees from 34.2 billion rupees.
“The Company’s sales volume during the three months ended 31st March 2024 was lower in comparison to the same period last year, mainly due to the tax led price increases in line with the Government’s revenue proposals,” CTC told shareholders in the interim accounts.
Tax revenues were almost the same as the September 23 quarter, but sharply down from the December 2023 quarter, where there was a pick-up in sales.
CTC in the past has said there was a shift to beedi as well as rise in smuggling due to tax hikes.
For many years it has been claimed that the demand for cigarettes was inelastic and a fall in sales would be compensated by higher tax revenues.
However, either due to faster fall in actual consumption, or a shift to other products tax revenues are down from a year earlier.
Cigarette consumption lead to cancer and other diseases, but the objective will not be achieved if there is a shift to alternative non-taxed products.
CTC reported profits of 6.8 billion rupees for the quarter, up from 5.999 billion last year. There was a reduction in some costs, though wages and raw material costs were up.
(Colombo/May14/2024)