British American Tobacco unit Ceylon Tobacco reports 38.4% increase in profits for three-month period ending in March despite 3.6% volume drop, helped by cost cutting; EPS totals 10.8 Sri Lankan rupees

, May 12, 2014 () – Ceylon Tobacco Company Plc, a unit of British American Tobacco said profits surged 38.4 percent in the March 2014 quarter despite a 3.6 percent volume drop, helped by cost cutting.The firm reported earnings of 10.82 rupees per share for the quarter. The stock closed at 1,090 rupees Friday, down 10 rupees.

Gross revenues with state taxes rose 7.3 percent in the March quarter from a year earlier to 21,200 million rupees, with net revenues after excise and valued added taxes rising at a faster 12 percent to 5,243 million rupees, despite the volume drop.

The firm reported a 14 percent domestic sales drop in the March 2013 quarter as inflation rose and demand dropped in the wake of a balance of payments crisis triggered by credit financed fuel subsidies.

The state raised taxes on tobacco in the wake of the crisis and there was also an industry price increase allowing net revenues to also go up. The firm said export revenues rose by 48 million rupees and volumes by 31 million.

Ceylon Tobacco said it had also slashed operating expenses. In the March quarter raw material costs were almost unchanged at 597 million rupees, up from 587 million a year earlier.

Employee costs fell to 348 million rupees from 419 million and other operating expense fell to 929 million rupees from 1,236 million rupees.

The firm made a provision of 1.39 billion rupees for income tax up, from 1.10 billion a year earlier. Excise tax rose to 13.5 billion rupees from 12.8 billion rupees and value added taxes rose to 2.3 billion rupees from 2.1 billion rupees.

Ceylon Tobacco said authorities have made 236 raids during the quarter seizing 13 million illicit cigarettes with a market value of 332 million rupees. High tobacco taxes have driven smugglers.

The firm is expecting a court ruling on a health ministry directive to place graphic warning labels on cigarette packs.

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