Volumes up helped by excise restructure to combat illicit products
Ceylon Tobacco reports superior performance, upbeat for the future

The Ceylon Tobacco Company’s (CTC) outgoing Chairman, Lt. Gen. Denis Perera, reporting that the company had done "extremely well" in 2002 predicted that it "should perform better with the prevailing economic stability," in the company’s just published annual report for the year ended December 31, 2002.

"The government’s peace initiatives will undoubtedly help build the economy and place it on an accelerated growth path," he said.

CTC has seen group revenue grow to Rs. 4.4 billion from Rs. 4.1 billion in 2001 and posted an after-tax profit of Rs. 845.7 million, up from Rs. 673.8 million a year earlier. This translated to an earning per share of Rs. 4.51 against Rs. 3.60 in 2001.

The company had paid a total of 45% in dividends for the year under review, up from 36% the previous year.

Perera said that the company, working closely with the concerned authorities, had been able to combat illicitly manufactured and duty not paid cigarettes.

"With government’s successful restructuring of excise duties, your company was able to regain part of the lost market share which helped boost volumes for the year under review. The excise restructuring which took place in February 2002, allowed the company to deny illicit manufacturers of white cigarettes a large percentage of their sales," he said.

The chairman said that CTC is committed to "creating value across the nation, ensuring that it gives back something substantial to the society within which it operates."

CEO Paul Hiltermann, posted here from British American Tobacco in Switzerland, reported that John Player Gold Leaf, their flagship brand continues to grow despite difficult conditions in the context of the availability of counterfeit cigarettes in the marketplace.

This posed a serious and increasing threat to the Gold Leaf brand, Hiltermann said. They have introduced measures to help consumers to recognise their product by making changes to the pack and is also establishing close co-ordination with government agencies to ensure better enforcement of the law.

"However, much still needs to be done if we are to ensure the sustainability of the legal market into the future," he said.

Hiltermann also reported that Bristol, their mid-priced brand, continued to decline in volume. He was hopeful that the serious decline this brand had experience over the past few years will be arrested by the appropriate steps taken by the company.

"Our exports continued to be stable in our traditional markets, the Middle East and the Maldives," Hiltermann said.

He also reported that the year under review had seen their production operations performing at their best with peak productivity, cost and waste reductions enabling CTC operations to be benchmarked among the best in BAT’s Asia-Pacific factories.

These successes had seen CTC being enlisted to extend operational and technical support to associate companies within the region – Pakistan Tobacco Company and British American Tobacco Bangladesh Company Limited.

CTC’s fully owned subsidiary, Advent International Limited, which was formally incorporated last year is providing Enterprise Resource Planning (ERP) System Sales & Support and Business Process Consultancy to BAT group companies as well as other manufacturing and distributing companies here and abroad.

"We are confident that progressively this company will demonstrate our ability to make this new venture profitable and add a revenue stream to Ceylon Tobacco Company as well as earn foreign exchange for the country," he said.

In addition to Gen. Perera who is leaving the company after serving on the board of CTC for 13 years, including 5 years as Chairman, another two senior directors, James Mather and Saktha Amaratunga are retiring. Mather, a chartered accountant, served 8 years on the CTC board as a non-executive director and chaired its audit committee. Amaratunga ,the company’s finance director, goes to BAT Switzerland.

Former JKH Chairman Ken Balendra, who joined the CTC board some months ago, will succeed Perera as the new chairman of the company.

British American Tobacco Holdings (Sri Lanka) BV, the parent company, is the dominant shareholder of the company with 84.13% of its equity. A foreign fund, FTR Holdings SA, with 8.32% is the second biggest shareholder. The EPF and the Galle Face Hotel Company are ranked third and fourth in the share register, both owning less than one percent.

CTC which has a total of 4,041 shareholders has an issued capital of Rs. 1.87 billion, a capital reserve of Rs. 15 million, a general reserve of Rs. 2.4 million and retained earnings of Rs. 3.4 million in its books as at Dec. 31, 2002. The company’s share traded at a high of Rs. 45.50 and a low of Rs. 28 during the year under review. This compared to a trading range of Rs. 40 to Rs. 19.50 the previous year.

The directors of CTC are: Messrs. Lt. Gen. Denis Perera (Chairman), Paul Hiltermann (CEO), Chandra Jayaratne, Maurice Tsangaris, Ken Balendra, James Mather, Vijaya Malalasekera, Jeremy Pike, Jayampathi Bandaranayake and Mrs. Lakmali G. Nanayakkara.