Pakistan Tobacco : Transmission of Quarterly Report for the Period Ended 2023-06-30

Condensed Interim

Financial Statements

for the six months period ended June 30, 2023

CorporateInformation

Boardof Directors

Zafar Mahmood

Chairman & Independent Director

Syed Ali Akbar

MD / CEO & Executive Director

Kelly Burtenshaw

Director Finance/IT

Syed Asad Ali Shah

Legal & External Affairs Director

Wael Sabra

Non-Executive Director

Usman Zahur

Non-Executive Director

Asif Jooma

Independent Director

Mohammad Riaz

Independent Director

Faisal Saif

Non-Executive Director

Gary Tarrant

Non-Executive Director

Lt. Gen. (R) Najib Ullah Khan

Independent Director

Belinda Ross

Non-Executive Director

AuditCommittee

Mohammad Riaz (Chairman)

Lt. Gen. (R) Najib Ullah Khan

Belinda Ross

Wael Sabra

Asif Jooma

Sughra Sadaf (Secretary)

CompanySecretary

Madeeha Arshad Chaudhry

Registered Office

Pakistan Tobacco Company Limited

Serena Business Complex, Khayaban-e-

Suhrwardy. P.O. Box 2549, Islamabad-44000

Telephone: [phone]

Fax: [phone]

Web: www.ptc.com.pk

Factories

Akora Khattak Factory

P.O. Akora Khattak

Tehsil and District Nowshera,

Khyber Pakhtunkhwa

Telephone: [phone]

Fax: [phone]

Jhelum Factory

G.T. Road, Kala Gujran

Jhelum

Telephone: [phone]

Fax: [phone]

Bankers

MCB Bank Limited

MCB Islamic Bank Limited

Habib Bank Limited

National Bank of Pakistan

Citibank N.A.

Standard Chartered Bank (Pakistan) Limited Deutsche Bank AG

Bank Alfalah Limited

Habib Metropolitan Bank Limited Soneri Bank Limited

United Bank Limited

Auditors

KPMG Taseer Hadi & Co.

Chartered Accountants

Sixth Floor, State Life Building No. 5

Jinnah Avenue, Blue Area, Islamabad. 44000 Telephone: [phone]

Fax: [phone]

ShareRegistrar

FAMCO Associates (Pvt.) Ltd.

8-F, Near Hotel Faran, Nursery, Block 6, P.E.C.H.S, Shahrah-e-Faisal,

Karachi

Ph: [phone]

Pakistan Tobacco Company Limited | 01

Directors' Review

TheDirectorspresentperformanceof the Company for H1, 2023.

In February 2023, the Finance (Supplementary) Bill 2023 introduced the highest-ever excise increase for the tobacco industry. The excise duty on tier-1 brands was increased from Rs 6,500 to Rs 16,500 per thousand cigarettes (increase of 154%), whilst excise duty on tier-2 brands was increased from Rs 2,050 to Rs 5,050 per thousand cigarettes (increase of 146%). This unprecedented increase in excise led to a further widening of the price gap between the duty- paid (DP) cigarette brands and duty-not-paid (DNP) brands. This resulted in growth of DNP market share from 36.6% in January 2023 to 48.9% in June 2023. The recent Federal Budget 2023-24 announced in June 2023 has maintained these exorbitant excise rates offering no respite to the DP industry. In the absence of effective enforcement by Authorities against the DNP sector, the excessively high excise rates have caused a decline of 56% in the Company's domestic volume in June 2023 vs January 2023 and yielded significant losses to the National Exchequer and eroding investor confidence. Current imperative is for the Government to intervene by rationalizing excise rates for the tobacco industry and focus on enforcement measures through dedicated financial and human resources to ensure sustainability of large- scale manufacturing in general and DP industry in particular.

Pressure on Pakistan's foreign currency reserves during H1 2023 coupled with the highest-ever inflation in the Country's history, restricted imports of critical raw material and machinery. Following Government of Pakistan's recent breakthrough with IMF on a 9-monthStand-By- Agreement, and assurances from bilateral lenders to deposit foreign currency with State Bank of Pakistan (SBP), the Company is looking forward towards a more conducive regulatory environment wherein commercial banks can accommodate the industry's critical import requests on standard payment terms in a timely manner to avoid disruption of normal business activity.

As a responsible corporate citizen, the Company is fully committed to reduce the health impact of its business. In H1 2023, the company focused on accelerating its portfolio of tobacco-free modern oral nicotine pouches, posting a volume growth of 44% vs same period last year (SPLY). The Company will continue tapping into new opportunities to enhance its reduced risk product portfolio and provide its consumers with potentially reduced risk alternatives.

Key financial indicators of the Company for the period ended June 30, 2023, are summarized below:

	Rs (million)
	Jan - Jun, 2023	Jan - Jun, 2022
Gross Turnover	133,465	113,447
Excise Duties & Sales Tax	(87,367)	(68,442)
Net turnover	46,098	45,005
Cost of Sales	(19,464)	(23,825)
Gross Profit	26,634	21,180
Operating Profit	18,205	15,086
Profit Before Tax - PBT	21,008	15,710
Profit After Tax - PAT	11,042	8,512
Earnings per share - EPS (Rs)	43.22	33.32

02 | Condensed Interim Financial Statements

Domestic volume decreased by 40% vs SPLY due to the excise-led price increase in February 2023. In line with the Company's export agenda, goods worth $9 million were exported during the period under review. Due to pressure on foreign currency reserves, local currency devaluation and highest-ever inflation in the country's history, cost of sales decreased 18% vs SPLY despite a 40% decline in volume. Despite the cost pressures, operating profit increased by 21% through process optimization and productivity initiatives. Higher income from T-Bills yielded PBT increase of 34% vs SPLY. However, imposition of super tax has limited the PAT growth to 30% vs SPLY. EPS increased by 30% for the period under review due to effective overall commercial execution.

The Company continues to maintain focus on risk management and is committed to ensure business continuity through volatile macro-economic conditions without compromising the health and safety of its employees and that of its business partners. Further, PTC will continue driving value for its shareholders by leveraging its strong brand portfolio and providing exciting choices to its consumers. The Company continues to drive performance through its people focused programs to further strengthen its capability bandwidth to seamlessly deliver on business objectives through 2023 and beyond.

Syed Ali Akbar	Kelly(Burtenshaw
MD & Chief Executive Officer	Chief Financial Officer & Director

Pakistan Tobacco Company Limited | 03

04 | Condensed Interim Financial Statements