PMPKL posts 26pc volume decline

KARACHI: Philip Morris (Pakistan) Limited (PMPKL) witnessed a volume decline of 26 percent during the nine months ended September, 2020, however, the company’s turnover increased marginally as a result of decrease in its operational cost, a statement said.

The increase in revenue due to reduction in operational costs does not reflect the crisis that Pakistan's legal cigarette industry has been suffering from for the past decade due to the rapidly declining market share of legal trade.

PMPKL CFO Muhammad Zeeshan said, “The rapid increase of illicit cigarette trade and its accelerating market share continues to threaten the tax-compliant sector. PMPKL closed its manufacturing facility in 2019.”

This measure, albeit tough, was taken to ensure cost optimisation due to declining volumes. “The one-off impairment and employee separation cost expenses related to factory closure, which featured heavily in our 2019 accounts are no longer appearing in our 2020 accounts,” he added.

The significant decrease in other expenses by Rs2,463 million was the key driver behind the overall increase in the operating profit before tax from last year.

Commenting on the long-term view versus isolated data, he added, “Trends projections’ are more accurate when you take a long-term view instead of being selective, particularly when there are many externalities at play. This is especially true in a year like 2020 where the whole world has seen disruptions of an unprecedented nature.”

Instead of a quarterly outlook, a year to date comparison would give a more accurate picture when interpreting financials based on realities and facts. “If we take a long-term projection, our volume has more than halved in the past 10 years. Our internal data as well as independent research indicates that most of this volume was gained by tax non-compliant cigarette manufacturers,” Zeeshan added.

The legitimate business was at peril due to the accelerated growth of illicit in the industry. This has reduced PMPKL’s manufacturing footprint in the country down to one.