Government’s smoking ban continues to weigh down heavily on the bottom line of cigarette distributor, Carreras Group.

The company yesterday posted a 85 per cent decline in second quarter net income to $485.8 million for the period ending September 30, 2013.

The bulk of the decline was due to the receipt of a $3.4 billion pension surplus refund during the comparative quarter last year, but net earnings excluding that event was still lower by almost 25 per cent. Operating income for the period under review of $2.3 billion was 15 per cent less than the $2.7 billion earned last year not counting the extraordinary income.

“These financial results continue to reflect the negative impact of the public place smoking regulations on our volume base, wherein customers and consumers continue to express an uncertainty as to where the product can be consumed which has naturally affected sales over the quarter,” stated Carreras chairman Richard Lewis in a report accompanying the financial results.

Carreras reported that cigarette volumes has fallen by approximately 28 per cent since the regulations became effective in July, compared to the same period last year.

The no smoking policy in specified public spaces was imposed on July 15, with the implementation of the Public Health (Tobacco Control) Regulations 2013. It outlines places where smoking is prohibited, such as all enclosed places, public transportation, workplaces, government buildings, health facilities; sport, athletic and recreational facilities for use by the public; educational institutions; areas specifically for use by children, and places of collective use such as bus stops.

It also requires the use of large, graphic health warnings on tobacco products, instead of the text-only warnings currently used.

The law is consistent with the Government’s 2013/14 strategic priority focus on human capital development in relation to health care. According to Health Minister Dr Fenton Ferguson, the country spends billions each year addressing the ills caused by the effects of tobacco smoke, pointing out that the direct and indirect cost of tobacco use and exposure is estimated to be between US$750 million to US$1.3 billion.

However, after facing intense pressure from critics that argued that the law was excessive, the health minister allowed a parliamentary review of the measures.

The parliament committee subsequently recommended several changes, including that hotels should be allowed to have designated areas for smoking; that the present stipulation that graphic health warnings occupy 75 per cent of the top, front and back of cigarette packaging, should be reduced to 50 per cent; and that smoking should not be banned in private residences.

Carreras has since called for Ferguson to move swiftly in announcing final ammendments to the law in order to remove the uncertainty in the market.

“We are confident that once the minister announces these final ammendments, then greater clarity will be had by the thousands of businesses that sell cigarettes, as well as consumers,” the chairman’s report said.

The cigarette distributor said that sales were also negatively impacted by counterfeits of its Craven “A” brand of cigarettes, which it said were discovered in the market during the latter part of the review period.

“The various law enforcement authorities have since intensified their efforts to identify and apprehend the illicit traders and in implementing strategies to stem the growing illicit trade in cigarettes,” the company said.