Lahore, Pakistan – October 23, 2023
Philip Morris (Pakistan) Limited (the Company) has released its financial results for the quarter ended September 30, 2023, showcasing the impact of economic challenges and industry dynamics on its financial performance. During the nine months ended September 30, 2023, Philip Morris (Pakistan) Limited reported a Total Net Turnover of PKR 13,641 million, representing an 8.9% decrease compared to the same period last year. The domestic Net Turnover of PKR 10,575 million marked a significant decline of 24.1% versus the prior year, reflecting a 44% drop in volumes versus the prior year following the exorbitant excise increase in February 2023. The Company recorded a profit after tax of PKR 659 million for the same period, signifying a significant decrease compared to prior year, largely driven by the volume decline. In the first nine months of 2023, the company contributed PKR 26,189 million to the National Exchequer, reflecting a 22.5% increase compared to the prior period.
The Track & Trace System for the tobacco industry, implemented on July 1, 2022, aimed to boost tax revenue, combat counterfeiting, and prevent illicit goods smuggling through robust, nationwide electronic monitoring. While Philip Morris (Pakistan) Limited and two other companies have fully implemented the System, the remaining tobacco manufacturers have only signed the Tri-Partite Agreement but not fully implemented the System. An across-the-board implementation and effective monitoring of production volumes and goods tracking at retail outlets are essential for the System’s effectiveness.
A cumulative excise increase of over 200% during the fiscal year 2022/2023, including an unprecedented 150% excise hike in February 2023, led to a substantial decline of approximately 55% in tax-paid volumes between March and June 2023 versus same period prior year. For the first nine months of the year (January to September 2023), tax-paid volumes decreased by 37.9%, mainly due to multiple excise-driven price hikes. The prescribed minimum price for FED and Sales Tax collection is PKR 127.4 per pack, but non-tax-paid cigarettes are reportedly being sold at an average price of PKR 100 per pack, resulting in a price gap of around 200% compared to most tax-paid brands. Without effective monitoring, the annual estimated loss to the National Exchequer due to the non-tax-paid sector is expected to exceed PKR 240 billion.
“While the winds of economic change have posed new challenges for the tax-compliant tobacco industry, Philip Morris Pakistan remains steadfast in its commitment to adapt and navigate this evolving landscape. We continue to monitor market dynamics diligently, ensuring our operations remain resilient in these trying times,” said Mr. Roman Yazbeck Managing Director of Philip Morris Pakistan.
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