The Ceylon Tobacco Co. Ltd. has reported a robust 32% export growth and 5% growth in domestic sales for the six months ended June 30, 1998, shareholders have been told in an interim financial statement.

"Were it not for the increasing presence of illegally manufactured cigarettes and smuggled international brands in Sri Lanka, domestic sales would have been greater,'' the company said.

The statement said that the heavy restructuring charges incurred at "right sizing'' the company together with substantial investment made to ensure that CTC will be totally millenium compliant before the year 2000 had resulted in a decline of the profit before tax which was down 11% to Rs. 314 million during the period under review.

"The 7.4% reduction in the profit after tax, from Rs. 250.9 million to Rs. 232.4 million was less pronounced due to the expected positive tax impact arising from the continuing capital investment programme,'' the statement said.

The period under review saw an extraordinary item of Rs. 75 million which the company said was the after-tax profit derived from the sale of under-utilised properties - part of a radical set of initiatives to reallocate resources and reduce the cost base.

The directors who have just declared an interim dividend of 13% payable in September said that they remain committed to meeting shareholder expectation in terms of return on investment and growth.

Gross turnover for the 6 months ended June 30, 1998, at Rs. 9.4 billion was up from Rs. 9 billion a year earlier. But the company said that the figures for the two periods were not comparable due to differences in treatment of BTT and the recently introduced GST.

"All systems in operation at CTC are fully millenium compliant. The company is now in the process of ensuring that critical business partners are examining, fixing and testing their own systems to ensure that they too will be compliant before the deadline of Dec. 31, 1999.''

The millenium project's total estimated cost for CTC was stated at Rs. 36 million. But that did not include the potential costs of implementing any of the prepared contingency plans that will have to be activated in the event of any third party failure.