Tycoon Lucio Tan-led LT Group Inc. grew net profit in the first quarter by 41 percent year-on-year to P6.21 billion, driven mostly by tobacco price increases.
Earnings from the banking, beer and hard liquor businesses faltered, while the real estate business gained, LTG disclosed to the Philippine Stock Exchange on Friday.
LTG’s tobacco business reported a net income of P5 billion for the first three months, 76 percent higher year-on-year. Equity in net earnings from LTG’s 49.6 percent stake in PMFTC, the local joint venture firm with Philip Morris, was P5.02 billion, 86 percent more than the level in the same period last year.
The higher income was attributed to the higher share of premium Marlboro cigarette as well as the price increases implemented in late August 2019. Sales volume declined by 9 percent year-on-year in the first quarter following the imposition of higher taxes this year.
Effective January 1 this year, there was a P10 per pack increase in the excise tax of tobacco, to P45 per pack under Republic Act 11346. The tax will increase further by P5 per pack annually from 2021 to 2023, then increase by 5 percent annually thereafter. From a low of P2.72 per pack of 20 sticks in 2012 for the lower tier and P12 per pack for the upper tier, the current excise tax of P45 per pack is 3.75 to 16.5 times the levels seen in 2012.
“LTG is not against tax increases, but believes that the hikes should be moderate. Continual price increases to pass on higher excise taxes may result in further volume drops,” the company said.
The industry’s volume was estimated at 108.9 billion sticks in 2012 and declined by 35 percent to an estimated 70.5 billion sticks in 2019. The industry is estimated to have declined further by 9 percent in the first quarter of 2020, also partly due to the enhanced community quarantine (ECQ) implemented in Luzon starting March 17 and in other select cities thereafter.
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