More than 200 people have challenged arrests by police for violating the no smoking rule in public areas since it came into effect in 2007 and won their cases, because the law was not properly enforced, according to the CEO of Ceylon Tobacco Company (CTC).
“The National Authority of Tobacco and Alcohol Act No. 27 of 2007 says smoking within an enclosed public space is prohibited. So in places such as the street, people can smoke, but they are still being harassed (by police) as the law enforcement agencies are not aware of the law,” Mustanser Ali Khan, Managing Director/CEO, CTC told the Sunday Times FT.
“We engage with our retailers and distributors on the clarification of the law. At times we engage with law enforcement agencies and give them some clarity, but the issue is in enforcement. However at the same time sensible regulations are more than welcome,” he explained. Sales in CTC products dropped by five to six percent last year due to the government’s “Mathata Thitha” initiative ((full stop to intoxication) which has led to the rigid enforcement of laws pertaining to smoking in public and advertising of these products. “We see more regulation in the near future, but we are more apprehensive about how they are implemented,” Mr Khan said.
With regards to the company's quarterly statements which show each successive quarter as better than the rest, he said that the CTC has recognized its expenses are not ‘equally’ spread in the four quarters. “We are trying to correct this,” Mr. Khan noted, when asked if the company is onto some earnings management as there is a stark seasonality in its quarterly accounts. Usually CTC’s first quarter shows profits, the next is better than the first, the third quarter is better than the second and the last quarter ending in December is very good.
Mr. Khan noted that there is a certain seasonality (in sales) in December accounts as people get bonuses and the fact that it is the festive season. “Also there is a price increase towards the year-end which gives a better picture towards that time in CTC accounts,” he added. CTC, despite its revenue decreasing has seen its margins increase during the last few quarters.
“The revenue has not increased due to the declining trend in the market, but we have reduced the cost structures which is why the margins have risen,” Mr. Khan explained. He said CTC is trying to manage its raw material cost. “This is the biggest chunk (in our cost structure) and we are trying to manage our manufacturing cost,” he said, adding CTC is looking at a 7% manufacturing cost reduction this year. Last year CTC contributed Rs. 8.4 billion as state taxes which is 80% of the company’s revenue.