Philip Morris Pakistan (PMPK) Limited, which is the second-largest tobacco company in Pakistan, announced its financial performance for the first nine months of 2019 last week. It is among the two major tobacco firms operating in the formal sector, along with Pakistan Tobacco Company Limited.
The company is involved in manufacturing and sale of cigarettes and tobacco products. PMPK is an affiliate of Philip Morris International Inc. (PMI).
The tobacco giant reported a massive loss of Rs. 1.37 billion during the above mentioned time period. It had reported a profit of Rs. 881.42 million in the same period last year.
As per the financial statement, the losses were mainly due to the management’s decision to reorganize its operational footprint by closing its factory in Kotri.
During the 3rd quarter, the company faced tough circumstances as it reported a loss of Rs. 782 million as compared with a profit of Rs. 157.28 million last year.
Overall, during the nine months, the company posted sales of Rs. 11.0 billion which were down by 1.05% as compared with Rs. 11.15 billion last year. The cost of sales of the company increased by 14.90% to Rs. 7.23 billion as compared with Rs. 6.29 billion last year. In Pakistan, their product portfolio includes cigarette brands such as Marlboro, Parliament, Morven by Chesterfield, Diplomat, Philip Morris, L&M, Red & White.
The finance cost of the company also increased by 154.90% to Rs. 40.73 million as compared with Rs. 15.98 million. The distribution expenses decreased by 18.50% and other expenses saw a massive rise, increasing 6.2 times. It was reported at Rs. 2.82 billion as compared with Rs. 390 million in the same period last year.
The company posted a massive operating loss of Rs. 1.72 billion from an operating profit of Rs. 1.19 billion last year, mainly due to the fact that its costs and expenses did not fall in line with the weaker sales. Despite lower production, cost of sales was affected by higher input prices, with the rising cost of utilities and the impact of rupee devaluation this year.
According to the company’s official who requested anonymity, the tax regulated industry is facing challenges from the illicit sector. He urged the government needs to do more to curb the illicit cigarette trade in the country which is harming the taxpaying industry. He also said that the cost of manufacturing has gone up which has impacted this year’s result. Among the manufacturing sectors suffering the worst of the economic decline in recent months is the tobacco industry.
Overall production has also declined during the period as this is likely a consequence of higher cigarette prices in recent months for the formal industry. Just in 2019, so far, the FED on cigarettes has been raised twice which has impacted the company’s result.
The company reported a loss per share of Rs. 22.31 as compared with earnings per share of Rs. 7.18 in the same period last year. PMPK’s share was last traded at a price of Rs. 2,832.36.