Financial Analysis of Pakistan Tobacco Company

Abstract

Pakistan Tobacco Company Limited, the first multinational to start operations in Pakistan is one of the two major players in the tobacco industry and has regained the market leadership in 2005. PTC is the largest excise tax generator in the private sector in Pakistan. With John Player Gold Leaf, Gold Flake and Dunhill being its major brands, PTC contributed Rs19.2 billion to the National Exchequer in 2005. PTC has been achieving outstanding growth in all areas of the business owing to the heavy investment in restructuring done in 2000. Since then, PTC has attained 192% increase in sales. With a negative after tax profit in 2000, PTC has come a long way to achieving Rs 1,322 million profits in just one year. Tobacco industry being a controversial industry has always been facing issues worldwide. Here in Pakistan, the major issue concerning the tobacco industry is the illicit trade. In the absence of strong government policies, the tax evaded sector continues to affect the Government revenues adversely besides reducing the market and threatening the long term profitability of the legitimate sector. Government of Pakistan is making continuous efforts to control the tax evasion by strengthening excise rules. This effort of the government has been effective through the full support extended by the local tobacco companies. Another important issue is the growing concern regarding the ill effects of cigarettes. Anti tobacco campaigns are a great threat for the industry and hamper its progress. This awareness has also forced the tobacco companies to stop advertising in the electronic media. To minimize the effect of these issues facing the tobacco industry, tobacco companies including PTC should continue supporting government in its efforts against the illicit trade. For the marketing and publicity issue, they must find other means and must prove themselves as socially responsible organizations by showing contributions towards health and safety and taking measures for youth smoking prevention.