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  • #56
    Agreed PP. Yes never to chase a share. Let it come to you.
    "The best values today are often found in the stocks that were once hot and have since gone cold"

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    • #57
      Elephant House expects 40% sales surge with sugar tax cut

      DECEMBER 9, 2018 0 COMMENTS By Charindra Chandrasena

      Following the recent reduction in the sugar tax imposed on sugar-sweetened soft drinks, Ceylon Cold Stores (CCS) or Elephant House expects beverage sales to rise by 40%. An official from John Keells Holdings’ subsidiary CCS told The Sunday Morning Business that the company suffered a sales drop of 40% after the introduction of the tax in November, 2017, and that the latest revision would help it reach those sales volumes again.

      The move to reduce the sugar tax by 40% comes following a meeting with former President Mahinda Rajapaksa, Treasury officials, and the fiscal planning officials.

      President Maithripala Sirisena introduced the sugar tax in November, 2017 by imposing 50 cents for every gram of sugar in sweetened beverages, as a measure towards controlling diabetes and obesity, after famously targeting Nestle’s Milo brand in a speech.

      Following the tax, leading beverage firms, including Ceylon Cold Stores and Nestle Lanka, saw a plunge in their beverage sales.

      In an equities research report on the performance of 267 listed firms, First Capital Holdings reported that earnings at Ceylon Cold Stores fall 31% in the third quarter of 2018, compared to the same quarter in 2017, as a result of the sugar tax.

      On the other hand, Nestlé Lanka saw its 2018 third quarter net profits increasing 15.6% year-on-year (YoY) to Rs. 941 million, despite a drop in sales figures. Citing the insufficient time period given to adjust the sugar percentage, the CCS official pointed that this is a long-pending request from the beverage sector of the country that has been approved.

      “In most of the countries where such taxes are implemented, they have allowed a threshold or given a reasonable basis, and have also given the industry time to adjust. This is something we’ve been requesting for some time.” The official added that reducing the sugar level in beverages cannot be done overnight, as it’s a gradual process. “We have started reducing sugar tax earlier than this tax was increased. We accept the fact that there are health concerns regarding this, but if you look at the bigger picture – the total sugar consumption in the country, the soft drink industry uses only about 3%.” He noted that imposing such taxes on the beverage sector alone will not help combat Diabetes, as majority of the sugar has been consumed through tea, coffee, and other snacks on a daily basis. However, he said:

      “We are on the path of reducing sugar in our drinks. As of now, we have reduced about 40% of sugar content in our drinks compared to what we had three years ago.” He also expressed his hope to further reduce the sugar content in beverages, despite the reduction in sugar tax.

      “Even if we get the concession, we will not stop reducing the sugar as much as possible in our drinks. That initiative will continue.” When The Sunday Morning Business reached Nestle Lanka for its comment on this matter, a company spokesperson said that, as always, it would continue to comply with the rules and regulations of the country.

      “We are committed to reduce sugar, salt, and fat in their products, and their work in that direction will continue. We have already reduced added sugar in our key ready-to-drink (RTD) beverages by more than 30% over the last five years, and these products have one of the lowest sugar levels in their category today.
      "The best values today are often found in the stocks that were once hot and have since gone cold"

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      • #58
        No sugar tax reduction yet for beverages
        DECEMBER 19, 2018 0 COMMENTS

        Straps: – Carbonated beverage firms still being taxed – No gazette was ever issued By Charindra Chandrasena Contrary to reports, there has been no reduction in the sugar tax on carbonated beverages due to developments which followed the initial decision in early December.

        Former President Mahinda Rajapaksa, while holding the post of Prime Minister and Finance Minister in the disputed Government, ordered a reduction in the sugar tax on sweetened beverages by 40% on 1 December.

        This was following a meeting with several beverage manufacturing firms in the country on 30 November. However, the Interim Order issued by the Court of Appeal the following Monday (3) preventing the functioning of Mahinda Rajapaksa as Prime Minister or Finance Minister had also prevented the issuance of the relevant gazette reducing the sugar tax.

        A tax of 50 cents per gram of sugar in sweetened beverages was imposed in November last year by President Maithripala Sirisena to combat non-communicable diseases (NCD) in the country and became effective overnight. The tax specifically targeted the carbonated soft drinks segment, which is dominated by local player Ceylon Cold Stores (CCS) or Elephant House, and two multinational giants – Coca-Cola and Pepsi.

        Speaking to The Sunday Morning Business on condition of anonymity, industry insiders said that as the gazette had not been issued, they are operating as before, and that there had been no change in their profit margins or retail prices. Furthermore, they also said that even if the gazette had been issued, the prices would not have come down immediately until the existing stocks were finished.

        Any amendments to retail prices may also have been a collective decision made in consultation between all three players as opposed to an individual decision of one company, as all three companies are a part of The Beverage Association of Sri Lanka (BAOSL) – an industry collective.

        The Sunday Morning Business spoke to Nielsen Sri Lanka Managing Director Sharang Pant on the impact the sugar tax had over the past year on the CSD sector in Sri Lanka. Pant said that a few years ago, the CSD industry was the fastest growing food and beverage sector. It reported a 16-17% growth in 2016 owing to a drought which drove consumption and attractive packaging and expansion in distribution networks.

        However, the growth rate had slowed down since 2017 with a relatively better monsoon. According to Pant, 2Q 2017 witnessed a 9% volume growth year-on-year (YoY), which went down to 3% during the 3Q 2017 YoY before suffering degrowth of 15% in 4Q 2017 YoY.

        However, as a result of higher inflation and the introduction of the sugar tax, previously witnessed declines became more significant in 2018, which was the first full quarter that was affected by the sugar tax. “The bulk of the decline actually started in 2018. During the 1Q 2018, the volume of beverage sales declined by 27%,” he said. He added: “One reason is sugar tax. The other reason is that food inflation was around 13-14% and the consumer was feeling the high prices.” The decline extended to the 3Q 2018, marking a drastic decline of 40%.

        Following the imposition of the sugar tax, the popularity of sugar-free variants increased driven by a more health conscious market. Sugar-free variants entered the local beverage market in 2018, which mitigated the impact of the decline in volumes to a certain extent. Coke and Pepsi had a sugar-free variant globally which it promoted heavily from 4Q 2018. Elephant House introduced its own sugar-free variant in the first half of 2018.

        The Sunday Morning Business reliably learnt that Pepsi has been affected the most by the sugar tax in terms of volumes. Neither a threshold level of tax free sugar nor an adjustment time period was given to beverage manufacturers and as reported by The Sunday Morning Business last week, beverage sales of Elephant House, Coca Cola Lanka (Pvt.) Ltd., Ceylon Cold Stores, and Varun Beverages Lanka (Pvt.) Ltd. were impacted due to the sugar tax as the retail prices went up by 40%.

        In an equities research report based on the performance of 267 listed firms, First Capital Holdings reported that earnings at Ceylon Cold Stores fell 31% in the third quarter of 2018, compared to the same quarter in 2017 as a result of the sugar tax. The Sunday Morning Business reliably learnt that the industry has had to shelve plans of major expansion and investments over the past 12 months owing to the sugar tax.
        "The best values today are often found in the stocks that were once hot and have since gone cold"

        Comment


        • #59
          Very good report. Thanks.

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          • #60
            Health Minister Rajitha Senaratne assuming duties says he will take steps to increase the Sugar Tax of carbonated drinks & fruit juices reduced by @PresRajapaksa - Azzam Ameen

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            • #61
              As expected, but it was never brought down neda.

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