Tobacco firms rake in more profits from steep price hike

Park Sae-jin Reporter() | Posted : September 23, 2016, 10:00 | Updated : September 23, 2016, 10:00

[Courtesy of Philip Morris]

South Korean and foreign tobacco majors raked in considerable profits last year from a steep hike in cigarette prices that took effect in January last year to reduce smoking, financial reports analyzed by an opposition legislator showed Friday.

The report was released by opposition lawmaker Park Young-sun, based on financial statements provided by Philip Morris International, British American Tobacco (BAT) and South Korea's sole tobacco producer KT&G Corp.

As part of an anti-smoking campaign, South Korea raised the average price of cigarettes by 80 percent to 4,500 won from January 1 last year.

KT&G's sales rose 2.9 percent on-year to 2.82 trillion won in 2015 with its net profit soaring 32.2 percent to 987.9 billion won.

Sales of Philip Morris were 15.3 percent to 810.8 billion won and net profit jumped 33.9 percent to 191.7 billion won. BAT's 2015 sales fell 13.5 percent to 391 billion won, but it posted a net profit of 27 billion won compared to a net loss of 9.6 billion won a year ago.

The revelation followed a report by the Board of Audit and Inspection, which accused tobacco firms operating in South Korea of saving 793.8 billion won in tax payment by hoarding a huge amount of packs and selling them after a price hike.

Philip Morris and BAT were accused of making an illegal profit of 169.1 billion won and 39.2 billion won respectively.

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