Business
Ceylon Tobacco Company PLC: Fags ignite bottom-line boost
Gross Revenue of CTC is estimated to accelerate to achieve a CAGR of 6% during the period 2022E2024E mainly attributing to continuous price hikes and swift bounce back in the tourism sector which was significantly curbed since 2020. Gross Revenue of CTC is expected to enhance in 2022E amidst the current economic crisis on account of VAT rate hike by 4.0%, which consequently increased the price of a cigarette by LKR 5.00 reflecting a rise in price by 6.3%-7.1% in major brands of CTC. In line with the past trend, we anticipate an annual tax hike in cigarettes resulting in further price hikes which will be far greater than the tax increase as the pricing power the company holds as the Tobacco Monopolist allows to pass on such increases to the consumer. We estimate the Gross Revenue of CTC to set on a marginal growth of 1.2% to LKR 135.9Bn in 2022E compared to LKR 134.4Bn in 2021, with volumes reacting negatively to the unfavourable economic climate. However, growth in turnover would expedite in 2023E as turnover is expected to rise by 5.3% to LKR 143.3Bn and by 6.4% to LKR 152.5Bn in 2024E with easing economic conditions improving purchasing power of consumers and positive developments in the political front and expected financial assistance from external parties bringing in hope for revamp in tourism and recovery of volumes.
It is expected for CTC’s margins (Net Revenue/Gross Revenue) to increase narrowly to 25.1% for 2022E while reaching 26.5% for 2023E (+146bps) and 28.4% for 2024E (+186bps). Moreover, operating profit margin of CTC too is expected to increase marginally to 78.0% in 2022E compared to 77.7% in 2021 (+30bps). A possible shift in demand from domestic consumers to low margin products from high margin products and an overall decline in volumes coupled with a probable rise in demand for illicit beedi market as a result of depleting disposable income has a potential of hampering margins of CTC in the short term. However, the potential negative impact from this is offset by the escalation indemand for high margin products of CTC owing to the revival in the tourism sector in 2022 with tourist arrivals expected to rise beyond 800,000 by the end of 2022 while it has already crossed the 400,000 level for the period of January-June for the first time after 2019. Although, we expect volumes to decline by 12.0% in the current financial year, volumes would normalize by 2023E as the demand for cigarettes is expected to rebound due to its inelastic nature following the past trend of consumers adjusting to price hikes at a rapid pace. Thus, bottom line of CTC is expected to grow by 2.1% in 2022E and record at LKR 16.5Bn while it is expected to grow at 10.7% in 2023E recording an earnings of LKR 18.2Bn.
CTC is more likely to maintain its average payout of c.90.0% in order to repatriate profits to its parent company British American Tobacco which owns 84% of CTC while providing a dividend yield of 13.4% and 14.8% in 2022E and 2023E respectively.
In FY22E, we expect CTC to record a profit of LKR 16.5Bn (2%YoY) while FY23E net profit is expected to record at LKR 18.2Bn (11%YoY). For FY22E, CTC is expected to deliver a total return of 94.3% including a DY of 13.4% while for FY23E a total return of 103.8% is expected inclusive of 14.8% DY.
-First Capital Research
Business
Priority areas for deepening Japan-SL economic ties
Japan Business Council (SLJBC) of The Ceylon Chamber of Commerce recently held its 47th AGM, with the Ambassador of Japan and the Patron of the Council, Akio ISOMATA, attending as the Chief Guest.
Addressing the gathering, Ambassador ISOMATA outlined three priorities for deepening bilateral economic relations: an effective and forward-looking trade and investment policy, the promotion of domestic industrial policy, and expanded investment in renewable energy. He noted that Sri Lanka’s ongoing review of its Free Trade Agreement policy would be important in shaping the country’s future negotiating landscape. He encouraged Sri Lanka to look Eastward toward Southeast Asia and Japan, proposing that the country adopt an export-oriented industrial model. The Ambassador welcomed the Government’s National Export Development Plan 2026 and National Mineral Policy 2026 as consistent with Japan’s vision of connecting Sri Lanka’s export-related manufacturing sectors with India’s high-growth manufacturing base.
In his address, President Athulla R F Edirisinghe reflected on nearly seven decades of humanitarian and development support extended by Japan to Sri Lanka, and paid tribute to the Chairman of the Sasakawa Peace Foundation Yohei Sasakawa, for his magnanimity in establishing the Foundation. Reflecting on the history of Japanese investment in the region from the 1970s onward, he observed that Sri Lanka had missed many opportunities to attract Japanese foreign direct investment. Highlighting the 2025 proposal for a Sri Lanka – Japan Economic Corridor by the Ministry of Economy, Trade, and Industry Japan, he called on Sri Lankan businesses, industry associations, and the wider community to come together in dialogue with the Government to ensure the country does not miss this opportunity as well.
2026/27 Committee: President: Athulla R F Edirisinghe – Director, Hirohama Ceylon (Pvt) Ltd, Senior Vice President – Ruwan Waidyaratne – Managing Director, Hayleys Advantis Ltd, Vice – President – Shamil Mendis – Managing Director, Spear International (Pvt) Ltd, Treasurer – Rohitha Mendis – Managing Director of Prudential Shipping Lines (Pte) Ltd, Immediate Past President – Mahen Kariyawasan – Managing Director, Andrew The Travel Company (Pvt) Ltd, representatives from Amano Lanka Engineering (Pvt) Ltd, BOV Capital (Pvt) Ltd, Brandix Apparel (Pvt) Ltd, Heritage Teas (Pvt) Ltd, Kalhari Enterprises (Pvt) Ltd, Lanka Harness (Pvt) Ltd, Dentsu Grant (Pvt) Ltd, MAC Holdings (Pvt) Ltd, and Vidullanka PLC. By invitation: HVA Foods PLC (subsidiary of George Steuart & Co), Spillburg Holdings (Pvt) Ltd, and Vaughan Chemicals (Pvt) Ltd.
The Sri Lanka – Japan Business Council plays an important role in promoting trade, tourism, and investments between Japan and Sri Lanka. For membership inquiries contact Kiyara at The Ceylon Chamber of Commerce via E-mail: businesscouncils1@chamber.lk or Tel.: 011 5588875/ 5588800.
Business
Rekawa turns turtle conservation into a 30-year community business model
By Ifham Nizam
What started 30 years ago as an effort to protect sea turtles has evolved into a community-based economic model that has generated livelihoods, attracted tourists and transformed Rekawa into one of Sri Lanka’s best-known nature tourism destinations.
The Rekawa Turtle Conservation Project, launched on September 2, 1996, by the Turtle Conservation Project (TCP) in partnership with the Department of Wildlife Conservation and the Rekawa community, marked its 30th anniversary last week, demonstrating how biodiversity protection can become an economic opportunity for communities living alongside sensitive natural resources.
Speaking at the anniversary celebrations, TCP chairman Thushan Kapurusinghe said the project currently provides direct livelihoods for 28 people, but its economic impact extends considerably beyond those directly employed by the programme.
‘Today, 28 people directly earn their livelihood through this project. But its impact goes far beyond those 28 individuals, Kapurusinghe said.
He pointed to the transformation of the area over the past three decades, arguing that the growth of tourism in the community has been closely linked to the turtle conservation programme.
‘If you travel from Netolpitiya to this area, you can clearly see how much the village has transformed over the years. There is no doubt that the growth of tourism in this community has been driven by the Turtle Conservation Project, he said.
The economic significance of Rekawa lies in its ability to convert the protection of a natural asset into a source of recurring community income.
Tourists do not come to Rekawa merely to see a beach. They come to witness sea turtles emerging from the ocean and nesting in their natural habitat—a tourism experience that depends directly on the continued protection of the nesting beach.
Kapurusinghe said tour operators regularly bring visitors to Rekawa, with some tourists traveling there after visiting major attractions such as the Kandy Esala Perahera.
The model represents a fundamental shift from viewing conservation as an expense to recognising biodiversity as an economic asset that can generate sustainable livelihoods when properly managed.
The 30th anniversary celebration at the Rekawa Turtle Conservation Project Information Centre brought together Southern Wildlife Region Director of the Department of Wildlife Conservation Channa Suraweera, government officials, conservation organisations, community representatives and long-standing supporters of the initiative.
Individuals who had contributed to the project over the past three decades were also recognised with awards for their service to sea turtle and environmental conservation.
Rekawa’s experience has attracted international attention because of precisely this combination of conservation and community development. The project has received international recognition as well as the Green Employment Award from the Ministry of Environment and Natural Resources. Earlier international recognition included a highly commended ‘Tourism for Tomorrow’ award, while the project’s turtle-watch programme subsequently received further recognition in responsible tourism and conservation.
Business
Ceylinco Life brings premium policyholders closer to the magic of the Kandy Perahera
For an evening, the timeless spectacle of the Kandy Esala Perahera unfolded at especially close quarters for a select group of Ceylinco Life’s most valued policyholders and their families, who were hosted to an exclusive viewing experience by the Company’s Customer Relations Division.
Held at the Ceylinco Life Kandy Branch on Kings Street, the annual event coincided with the second Randoli Perahera, bringing guests into the heart of one of Sri Lanka’s most spectacular expressions of culture, tradition and pageantry.
As the procession made its majestic passage through the streets of Kandy, guests enjoyed VIP seating at a prime vantage point, allowing them to experience the colour, movement and grandeur of the Perahera up close. The evening offered a fitting setting for Ceylinco Life to celebrate its enduring relationships with its premium clientele.
The experience extended well beyond the spectacle outside. Guests were welcomed with evening refreshments and an exclusive dinner buffet presented by the prestigious Amaya Hills Resort, adding a fine-dining dimension to an already memorable evening.
Families, too, were at the centre of the occasion. A private movie theatre experience provided entertainment for children and adults alike, while each attending family received a beautifully framed family photograph as a personalised souvenir, a tangible reminder of an evening shared together against the backdrop of one of Sri Lanka’s most treasured cultural traditions.
Besides being a much sought-after opportunity to watch the Perahera, the occasion was an expression of appreciation. Through its continuing Customer Relationship Management activities, Ceylinco Life seeks to create experiences that recognise its most valued policyholders not simply as customers, but as relationships to be celebrated and nurtured. And on this particular August evening, the enduring splendour of the Kandy Perahera provided the perfect setting for doing just that.
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