Sri lankan’s Smoking 14 Percent Less

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Sri Lanka’s Ceylon Tobacco Company Plc said cigarette sales dropped 14 percent in the March 2013 quarter from a year earlier, but profits dropped only 1.8 percent to 1,463 million rupees helped by wider margins.
The firm reported earnings per share of 7.81 rupees for the quarter.CTC, a unit of British American Tobacco, said sales dropped 14 percent in “challenging economic conditions” and smokers contributed 15.1 billion rupees to the Treasury in the quarter compared.

In the first quarter of March excise, value added and turnover tax was 15.29 billion rupees.

There was an income tax provision of 1.1 billion rupees for the quarter as well.

Sri Lanka has a habit of raising tobacco taxes in times of economic troubles to meet state spending.

Sri Lanka hit a balance of payments crisis from mid 2011 as energy subsidies were financed with bank loans which were ultimately accommodated by central bank credit (printed money).

Weaker economic conditions and higher prices can make people divert spending away from tobacco to other goods or cheaper substitutes that are taxed at lower rates.

CTC said it had been able to move customers to a premium brands and also up exports by 31 percent in the period.

CTC said 295 raids were conducted by authorities who seized 295 million sticks worth 300 million rupees in potentially lost taxes.

Gross revenues edged marginally lower to 19.74 billion rupees in the March 2013 quarter from 19.79 billion rupees a year earlier.

Tobacco which is addictive is generally said to have ‘inelastic demand’ as people find it difficult to kick the addiction, but in Sri Lanka tobacco smoking has been in long term decline.

Sri Lanka’s health authorities are also pushing for more explicit health warnings.

According to the World Health Organization tobacco use is the most important risk factor for cancer causing 22 percent of global cancer deaths and 71 percent of global lung cancer deaths.

CTC said it was fighting labeling rules in court and the March date for implementation had been delayed to the next date of hearing on May 28.(LBO)

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