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Karachi: Pakistan Tobacco Company Limited (PTC) has issued a comprehensive update on its performance for the first half of 2024, navigating through a challenging regulatory landscape while maintaining its commitment to shareholder value and operational excellence.
The company’s directors highlighted in their recent review that PTC continues to leverage its strong brand portfolio and dedicated workforce to achieve sustainable business outcomes. According to information available from the Pakistan Stock Exchange (PSX), PTC managed to post a gross turnover of Rs 181.3 billion during the period, up from Rs 133.5 billion in the previous year, despite significant challenges in the fiscal and regulatory environment affecting the tobacco industry in Pakistan.
The period witnessed a stable gross profit of Rs 23.6 billion compared to Rs 26.6 billion last year. Operating profit stood at Rs 15.1 billion, a decrease from Rs 18.2 billion in the previous year, reflecting the intense cost pressures faced by the company. Profit before tax was Rs 19.2 billion, with net profit after tax slightly down at Rs 11 billion, maintaining close to last year’s level.
The backdrop to this financial performance includes an unprecedented 200% increase in Federal Excise Duty (FED) on cigarettes during the fiscal year 2022-23, which shifted consumption towards non-tax compliant sectors. The illicit market’s share, as noted by studies from LUMS and NUST, surged to 58% in 2023, translating into a significant loss of tax revenue exceeding Rs 300 billion. Despite these challenges, PTC’s domestic volume grew by 6%, a testament to the strength of its brand and market strategies.
To counteract the illicit trade, the Pakistani government has kept excise rates on cigarettes unchanged for the fiscal year 2024-25 and increased enforcement of tax laws. However, challenges persist with the implementation of the Track and Trace System (T£tTS), which has so far been adopted by only two legal manufacturers, increasing their operational costs without curbing illegal activities effectively.
Moreover, the new tax regime has introduced a hefty FED on modern oral products and revised the duty on E-liquids, potentially disadvantaging legitimate players against illicit competitors. This high tax burden is likely to deter investment in reduced-risk products and impact the legal market’s competitiveness.
Despite these hurdles, PTC reported successful exports worth $8.1 million in the first half of 2024, aligning with its strategic focus on expanding its international footprint. The cost of sales saw a sharp increase, mainly due to a spike in leaf prices, but through cost optimization and efficient funds management, the company managed to mitigate the impact on its bottom line.
In recognition of its performance, PTC declared an interim dividend of PKR 30 per share in June 2024, underlining its commitment to delivering shareholder value. The company remains optimistic about its prospects, driven by robust fundamentals and a clear strategic direction.
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