Philip Morris posts Rs2.4bn operating loss for 2019

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ISLAMABAD: Philip Morris (Pakistan) Limited (PMPKL) has announced an operating loss before tax of Rs2,444 million for the year ended December 31, 2019.

The loss was mainly due to the management’s decision to reorganize its operational footprint by closing its factory in Kotri, which was essential to ensure long term sustainability of the business in Pakistan, considering the unpredictable fiscal environment.

Excluding the one-off impairment and employee separation costs, which was the result of the closure of the Kotri factory and GLT Voluntary Separation Scheme, the company would have recorded an operating profit before tax of Rs357 million for the year ended December 31, 2019, instead of operating loss before tax as mentioned above.

During the year, the compliant [taxpaying] tobacco industry faced challenges from the non-paid illicit sector as the government continued to impose heavy excise increases with limited enforcement. The government announced an increase in FED in value tier of 46pc in Sept 2018 followed by another increase of 32pc in June 2019 which resulted in the increase of price differential between compliant taxpaying industry brands and non-tax paid brands selling below minimum legal price (current illicit incidence is 34.7pc of the total tobacco market).

These excessive excise tax increases pose serious threats to the sustainability of the taxing industry volume base and are detrimental for the government revenues in the long run. Therefore, an equitable tax structure with strict implementation of enforcement measures is necessary to restrict illicit sector while ensuring the sustainability of the compliant tobacco industry.

Commenting on the announcement, PMPKL Managing Director Roman Yazbeck said, “The management team is committed to improving the overall performance of the company. There are many strategic initiatives under discussion which we believe will have a positive impact on the bottom line. We would like to appreciate the recent enforcement by the government to curb non-tax paid illicit trade and request for a continued enforcement action to create a level playing field for the legitimate and taxpaying manufacturers.”

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