KARACHI, Oct 9: Pakistan Tobacco Company Limited had managed to swing back to a profit of Rs354 million in 2001, after six years of serial losses. The accounts for the six months to end-June 2002, released recently, shows two per cent slip in the topline to Rs10.8 billion, from Rs11.0 billion for the corresponding period of last year. Pre-tax profit, nonetheless, rose sharply by 175 per cent to Rs417 million, from Rs152 million and after tax profit showed growth of 92 per cent to Rs248 million, from Rs129 million.

“Effective cost management, improvement in company’s brand mix, stable exchange rates, and price increases during the second half of 2001, have helped to achieve these remarkable results,” directors claimed in their half term review. They observed that the decrease of two per cent in turnover was mainly due to decrease in volumes of the company’s low-priced brands, which were extremely vulnerable to tax-evading brands that sold at significantly lower prices. “However, sales volume of company’s premium and medium-priced brands during the first half of 2002, remained slightly ahead of same period last year,” directors stated.

New products introduced during the past two years accounted for 33 per cent of PTC’s sales during the six months under review, which the company said was unparalleled performance in new product innovation in the cigarette industry. The company has continued to claim that four out of the five top selling brands in Pakistan, are those of PTC. They include Gold Flake, Capstan, John Players Gold Leaf and Embassy.

No one benefited as much from the PTC’s turnover and profit as the government, which received a cool sum of Rs7.258 billion in the six months to end-June 2002, under excise duty and sales tax on cigarettes, excise duty on tobacco, customs duty and municipal taxes on tobacco/materials. That sum, alone probably should stand out as one of the highest paid by any corporate or individual taxpayer in the country. Interestingly, for all the years between 1995 to 2000, when the company lost money every year with losses accumulating to a huge Rs1.68 billion, PTC kept on paying duties and taxes and its contribution to the national exchequer during those years are stated to have totalled to a staggering Rs53 billion.

For the shareholders in Pakistan Tobacco Company, this looks like an moment to celebrate. They had seen the company doing everything since 1994 to bolster earnings, but with little success. From the launch of sunflower cooking oil “Sundrop” in the winter of 1994, and the sale of residential property at Clifton, Karachi, that provided extra cash of Rs56.9 million, PTC also went on to sell its Karachi factory premises, which produced gain of Rs134.7 million in 1996. But despite all those efforts, the bottomline remained in the red. In 2000-01, the company undertook major restructuring. More than 1,200 jobs were axed and a third of the workforce left the company. Almost Rs770 million of the 2001 losses were attributed to payments under the staff separation scheme.

The Board did not declare a dividend for shareholders for 2001 and used all of the profit to wipe out the huge accumulated deficit of Rs337 million on the balance sheet. But the important thing is that the shareholders’ equity is back in the black. At end-June 2002, shareholders’ equity amounted to Rs2.820 billion, with Rs2.555 billion being the paid-up capital.

The company had paid the last cash dividend in 1995. The 10- rupee share in PTC had hit its record high at Rs162 in 1994. The price slipped over the years to hit the lowest Rs8.50 in 2000; but the stock has now recovered to Rs25.95.

For PTC, it isn’t still a smooth journey. “We reiterate that tax evading sector remains a major threat to the government revenue and to our business,” directors complain in their half term report, adding that the steps taken by the government in the past to check evasion had been encouraging. However, recent increase in activities of the tax-evading sector were stated to be alarming; the company urging government support in the matter.