Philip Morris (Pakistan) Limited announces financial results for the year ended December 31st, 2020

Philip Morris (Pakistan) Limited (“Company”) announced a profit aftertax of PKR 1,765 million for the year ended December 31st, 2020 as compared to a loss after tax of PKR 1,980 million in the corresponding period last year. The overall increase in profit after tax from last year is mainly due to a significant decrease in other expenses by PKR 2,732 million, which is largely attributable to the one-off impairment and employee separation cost charged on account of closure of the Company’s factory in Kotri during 2019.

During the year ended, the Company’s volume declined by 20% mainly reflecting the pressure faced by the legally compliant tax paying cigarette sector from the expanding illicit one, which now accounts for approx. 37% of the total market for the year 2020 versus 33.1% for the year 2019 (Retail Audit). The Company’s contribution to the National Exchequer, for the year ended December 31, 2020, in the form of excise duty, sales tax and other government levies, stood at PKR 22,210 million, a decrease of 6%, compared to the preceding year. This is mainly attributable to the excessive excise duty increases of 93% (Value Tier) during Federal Budgets of September 2018 and June 2019 that stretched the price gap between duty evaded and duty paid cigarettes which are selling at lower prices than the minimum price prescribed under tax regime with respect to levy and collection of federal excise duty i.e. PKR 63/ per pack. In March 2020, the government issued a Statutory Regulatory Order No. 72(I)/2020 further restricting advertising, promotion and sponsorship of tobacco and tobacco products leading to a lack of a level playing field between law abiding corporates and illicit domestic manufacturers who continue to violate advertising restrictions.

During the period ended December 31st, 2020 the Company’s domestic net turnover stood at PKR 13,983 million resulting in an increase of 7% driven by the excise led price increase in June 2019 coupled with price increase in February 2020, both were essential to offset the adverse impact of severe volume decline of 20% versus 2019. During the same time, the Company’s exports turnover stood at PKR 2,613 million (US$ 16.3 million) showing a significant increase as compared to last year. The export of approximately 7 million kilos of tobacco is part of the Company’s commitment to support Pakistan’s goals of increasing exports and earn foreign exchange for the country.

Sharing his views on the announcement, Roman Yazbeck, Managing Director Philip Morris (Pakistan) Limited said, “Although last year brought a series of unprecedented challenges due to the pandemic, our entire management team remained committed tominimizing the disruption to ensure business continuity. We appreciate the Government’s effortsin taking steps to curb the menace of illicit sector but we continue to believe that strict and consistent enforcement are extremely critical against tax evading illicit sector to provide the level field for the compliant tax paying industry and to improve Government revenue.”

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