Philip Morris (Pakistan) Ltd announces financial results for Q1 ended March 31st, 2022

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Philip Morris (Pakistan) Limited (“PMPKL”) generated Total Net Turnover of PKR 5,345 million reflecting Domestic Net Turnover of PKR 4,497 million, + 2.1% vs. prior period due to an unaltered excise tax rates coupled with Exports Net Turnover of PKR 848 million, an increase of >100% vs. Q1 2021 due to delay in exports at the end of 2021 on account of external supply chain constraints.

A Profit After Tax of PKR 1,150 million for the quarter was posted, vs. prior period Profit After Tax of PKR 718 million. Higher profit after tax was mainly due to lower Distribution & Marketing Expenses in Q1’22 (timing & phasing of spend) coupled with higher Gross Profit.

The tax-paid cigarette industry in Pakistan continues to be challenged by the wide presence of non-tax paid illicit cigarettes that are being sold at an average price of PKR 38 per pack while the minimum price prescribed under the tax laws for levy and collection of Federal Excise Duty and Sales Tax is PKR 63 per pack and the tax payable per pack (Excise + Sales Tax) is at least PKR 44 per pack (value tier) of cigarettes.

The wide price-gap between tax-paid and non-tax paid cigarette brands has been the primary driver for the growth (current price gap between tax-paid and non-tax paid brands is estimated at over 200%). Excise driven price increases have contributed to the growth of the non-tax paid illicit segment. The government acknowledges the challenges that the tax-paying cigarette industry faces in Pakistan and has in the recent past taken several initiatives to curb the growth of the illicit cigarette sector.