Corporate results: Tobacco giant makes Rs1 million per hour in profit

Pakistan Tobacco Company records net profit of Rs4.7b for the first half of 2015

Farooq Baloch July 23, 2015
Pakistan Tobacco Company records net profit of Rs4.7b for the first half of 2015. PHOTO: FILE

KARACHI: In what has become its highest ever earnings, Pakistan Tobacco Company (PTC) made more than Rs1 million per hour in net profit during six months ended June 30, 2015, the company’s financial results showed on Wednesday.

The Pakistani subsidiary of British American Tobacco Company reported an after-tax profit of Rs4.7 billion or Rs18.5 per share for the first half of 2015, increasing its bottom line by two-thirds compared to Rs2.8 billion or Rs11 per share in the corresponding period of 2014.

This is the highest income PTC has ever reported since it launched operations in the country.

The multinational tobacco giant, which pays more in taxes to the government than what is paid by the entire salaried class combined, contributed Rs49 billion - also its highest ever - to the national exchequer in the form of duties and taxes for the period under review. This is a 17% increase over the same period of previous year.

Pakistan’s largest tobacco manufacturer, which accounts for more than half the market, saw its net sales increase by 23% to Rs24.6 billion during the period under review compared to Rs20 billion in the first six months of 2014.

“This result was well above market consensus estimates,” Topline Securities said in its report, adding the company’s net profit was driven by record high gross margins of 41%, a year-on-year (YoY) increase of 543 basis points.

Decline in international oil prices helped improve macroeconomic conditions, which led to higher consumer spending during the six-month period, the report said. As a result, PTC’s sales increased by 23% YoY.

On a quarter-on-quarter basis, net sales grew by 17% to Rs13.2 billion while after-tax profit registered a growth of 27%. On a YoY basis, sales and net earnings for the quarter ended June 30, 2015 were up 23% and 65% respectively, it said.

The company has posted five-year (2010-14) sales and profit compound annual growth rate of 13% and 10% respectively.

Pakistan is one of the biggest markets in Asia in terms of cigarette consumption with an estimated annual consumption of 81 billion sticks - that is 422 cigarettes per person per year.

“With a 2% rise in Pakistan’s population in 2015, the company’s volumes are expected to reach an estimated 45 billion sticks,” according to Topline’s report.

The government has increased federal excise duty (FED) on tobacco to 63% in the new budget. However, Topline said cigarette manufacturers have already increased prices by 5% to 10% on average to pass its impact on to the consumer.

Published in The Express Tribune, July 23rd,  2015.

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alam | 8 years ago | Reply The basic question i am eager to ask from PTC other companies and Pakistan tobacco board. Will they are willing to pass some relief to the growers / farmers as the price per killo remain the same (with meagre per anum increase) for years while the labour cost and wood for tobacco kilns increased more than 300% in recent years. Farmers of Khyber Pakhtunkhwa (Swabi, Mansehra, Mardan and Buner) are in chaos and desperate situation.
shahid | 8 years ago | Reply Most businsses in Pakistan do exceptionally well because of massive profit margins. Cost of production is way too low than retail price, even after factoring in taxes. Profit margins are then maintained by passing on the tax increases to consumers. And ofcourse, the profits are never used to slash retail prices to benefit consumers or increase salary of poor souls working down below. Having said that, watever economics are involved, smoking kills and should be banned even if it brings trillions in tax.
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