Pakistan’s cigarette production output continues on an upward trend. Photo credit: Marco Verch under Creative Commons 2.0
Recent data from the Pakistan Bureau of Statistics (PBS) revealed that the country’s cigarette production grew by 10% year-on-year to 29.15 billion sticks during January-June 2022. These recent figures continue a growing trend from 2021, when annual output hit 57 billion sticks, reflecting a 16% growth year-on-year from 2020.
The average monthly cigarette production for H1 2022 was 4.86 billion sticks, up from H1 2021’s 4.86 billion sticks, coming closer to 2018’s highest average monthly cigarette production of 5.1 billion sticks. The highest monthly production on record was 6.27 million sticks in April 2018.
Business Recorder reported that H1 2022’s 10% cigarette production growth was reflected in the financial reports of the country’s top two tobacco companies, Philip Morris (Pakistan) Limited (PMPK) and Pakistan Tobacco Company Limited (PAKT). PMPK’s net turnover grew to PKR10.16 billion, a 10% increase year-on-year, while PAKT’s net turnover grew by 21% year-on-year. While both companies' operating profitability increased by double digits during the analysis period thanks to their topline growth, their bottom lines/net profits still shrank by double digits. Both PAKT and PMPK had a 10% and 11% year-on-year decline in net income, respectively, to PKR8.51 billion and PKR1.53 billion. This may be in large part due to a 10% “super tax” levied on a number of industries in June this year, including tobacco.
A new PKR36 billion tax on cigarettes and tobacco announced this August may present another key challenge for the industry moving forward. Miftah Ismail, minister of finance and revenue, said the tax was imposed to fill the gap created by a PKR15 billion reduction in retail tax. The ministry had proposed an PKR18 billion tax on tobacco, but the federal government decided to double it.
The total tax levied on 50 pack-stack (1,000 cigarettes) for tier-1 cigarettes was hiked from PKR5,900 to PKR6,500, while tier-2 cigarettes saw a tax increase from PKR1,850 to PKR2,050. The tax on tobacco was raised by 3,800% from PKR10 per kg to PKR380 per kg.