The profits of Indonesia’s two biggest cigarette manufacturers dropped significantly following a cigarette excise tax hike, reports The Jakarta Post.
Gudang Garam and Sampoerna saw their net profits decline 28.62 percent year-on-year to IDR1.74 trillion ($120.6 million) and 22.13 percent to IDR2.58 trillion, respectively, in the first quarter of the year.
The two companies’ net profits were hit by rising excise costs on top of weak cigarette demand. The finance ministry raised cigarette excises by around 12.5 percent starting in February after raising them 23 percent last year to deter smoking and raise state revenue.
However, the hike applied to only machine-made cigarettes and not to hand-rolled cigarettes.
Most of tobacco companies’ sales volume in Indonesia comes from machine-made clove cigarettes.