Pakistan Tobacco : Transmission of Quarterly Report for the period ended on March 31, 2023

Condensed Interim

Financial Statements

for the three months period ended March 31, 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

Oliver Engels

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) Ltd. Deutsche Bank AG

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

In February 2023, the Finance (Supplementary) Bill 2023 introduced the highest-ever excise increase for tobacco industry whereby 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 led to a 100% price increase by the duty paid cigarette industry, further widening the gap from duty-not-paid (DNP) brands as prices of DNP segment were only marginally adjusted post increase in excise duty. This price disparity further incentivized DNP segment and adversely impacted government revenues due to duty-evasion. Further, excise tier threshold and minimum legal price increased by only 35% and 80% respectively thereby introducing anomaly in excise structure and negatively impacting the compliant duty-paid cigarette industry.

As a consequence, quantum and availability of cheap smuggled cigarettes has increased manifold and more than 70 smuggled cigarette brands have flooded the market with no graphical health warning. These brands are selling below minimum mandated legal price with impunity, flouting all regulations set by the Government while causing significant loss to the National Exchequer. As a result, the Company's domestic volume decreased by 64% in March 2023 vs January 2023 post the February excise increase. This increase has not only created a sustainability challenge for the duty paid cigarette industry but will also lead to a decline in large scale manufacturing without corresponding decline in smoking incidence due to widespread availability of DNP product. Stronger enforcement measures by Government with consistent follow-up by law enforcement agencies through dedicated financial and human resources is the need of the hour.

Pakistan's foreign currency reserves have been dwindling lately. With recent regulatory changes, the manufacturing industry has been struggling to access foreign currency for import of raw materials and machinery spares. Additionally, delays in repatriation of dividends to overseas shareholders has given rise to uncertainty amongst investor community. Coupled with local currency devaluation, overall situation is impeding business sustainability of the entire manufacturing sector. The Government, together with State Bank of Pakistan must intervene on a war footing to ensure that right policies are in place to facilitate the manufacturing industry, which is backbone of country's economy.

Key financial indicators of the Company for the period ended March 31, 2023 are summarized below:

	Rs. (million)
	Jan - Mar, 2023	Jan - Mar, 2022
Gross Turnover	58,721	52,832
FED & Sales Tax	(36,137)	(33,139)
Net Turnover	22,584	19,693
Cost of Sales	(9,632)	(10,490)
Gross Profit	12,951	9,203
Operating Profit	8,681	6,562
Profit Before Tax - PBT	9,812	6,709
Profit After Tax - PAT	6,744	4,886
Earnings Per Share - EPS (Rs)	26.40	19.12

02 | Condensed Interim Financial Information

Domestic volume decreased by 30% vs SPLY due to the excise-led price increase. In line with the Company's export agenda, goods worth $4.3 million were exported during the period under review. Due to pressure on foreign currency reserves, local currency devaluation and highest-ever inflation in country's history, cost of sales increased by 32% vs SPLY. Despite the cost pressures, operating profit increased by 32% through process optimization and productivity initiatives. Higher income from T-Bills improved PBT by 46% vs SPLY. However, imposition of super tax has limited PAT growth to 38% vs SPLY. EPS increased by 38% for the period under review due to effective overall commercial execution.

PTC continues to focus on creating value for consumers through its brands whilst maximizing shareholder value through robust risk management and cost optimization. The Company will continue to invest in the growth of its potentially reduced risk product portfolio in line with BAT Group's agenda of A Better TomorrowTM and to reduce the health impact of its business. PTC is well-equipped to manage aforementioned challenges and will continue to deliver on shareholder expectations during 2023 and beyond.

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

2022	2023
52,832	58,721	(Gross Turnover)
(33,139)	(36,137)	(FED & Sales Tax
19,693	22,584	(Net Turnover)
(10,490)	(9,632)	(Cost of Sales)
9,203	12,951	(Gross Profit)
6,562	8,681	(Operating Profit)
6,709	9,812	(Profit Before Tax - PBT)
4,886	6,744	(Profit After Tax - PAT)
19.12	26.40	(Earnings Per Share - EPS (Rs)