Pakistani smokers spend just about Rs100 billion every year on puffing their beloved cigarette sticks, based on statistics provided by WHO.
Time and again, the countrys smoking lot provides credible evidence to the old notion of tobacco consumption being recession proof. At least thats what the latest financial results of Pakistan Tobacco Company - the countrys largest cigarette manufacturer - suggest.
In times when consumers at large were cutting on daily expenses - even on their daily use items, thanks to costlier sugar, meat and milk - the tough-to-crack chain of smokers saved enough money to smoke their way out of the economic slowdown.
PTC recorded its highest ever profit in 2009, increasing a massive 19 percent year-on-year to a staggering Rs3 billion. The firms revenues surged by 17 percent during the period - laying the basis for an improved bottom line.
Taking a cue from the yesteryears numbers of the company, the number of cigarette sticks sold presumably went up by a good 11 percent. Knowing the resilient nature of the smokers, PTC continued to increase its cigarette prices without any fear of losing any grip on the market. Cigarette prices, on an average, increased by 6 percent during the period.
Given the price inelasticity of cigarette sales in Pakistan, it appears that the firm is cashing on the fast growing youth population in the country, which allows its topline to grow stronger year after year.
The smokers are good citizens. At least thats what the FBR should think; as PTCs consumers contribute a significant Rs9 billion to the national exchequer in the form of indirect taxes alone.
There is no surprise that the government has by and large failed to discourage tobacco consumption in the country, as every single cigarette stick sold, adds 81 paisas to the government kitty in the form of direct and indirect taxes.
Smuggling and illegal import of tobacco is often termed a major cause of concern by the top industry players, but it seldom affects their gross profit margins due to the strong consumer base and the ease of passing over the incremental cost to the end user. This is evident from the fact that PTCs gross profit margins in the period under review remained almost unchanged.
But what of those who do not smoke, yet suffer from smoking. Despite earning a handful amount from the tobacco industry, the health ministry does not seem too keen to reinvest the amount in society. Surely, the passive smokers would love a fairer deal.
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PAKISTAN TOBACCO IN NUMBERS
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CY09 CY08 CY07 CY06 CY05
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Cigarette sticks (mn) 46030* 41,469 37,186 34,549 30,620
Revenue/stick (Rs) 1.25 1.18 1.10 1.03 1.00
Total tax/stick (Rs) 0.81 0.76 0.70 0.66 0.64
Profits/stick (Rs) 0.07 0.06 0.07 0.06 0.04
Gross margins 38% 39% 41% 40% 38%
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* BR estimate on historical average growth Source: Company accounts
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