Demerara Tobacco Company Limited (Demtoco) realised an after-tax profit of $508M last year mainly as a result of price increases but it expects “no real growth” in volume sales this year.
The company says this is because of the current social and economic conditions in Guyana and the maturity in the tobacco market.
Chairman and Managing Director of Demtoco, Michael Harris, made the disclosures during the company’s Annual General Meeting held on Monday at the Hotel Tower.
Harris said price increases of 7.79% on the Bristol Soft Cup and 9% on Benson & Hedges were introduced mid-last year. Sales for 2002 were $2.9B as against $2.7B the previous year, an increase of 8.2%.
Distribution costs fell from $170M to $149M while administration expenses increased from $285M to $299M. Other operating costs saw a marginal increase from $15M to $15.6M. The company’s payable taxes increased from $346M to $485M.
Earnings per share increased by 33% while dividends were $17.84 per share for 2002, the Managing Director indicated.
Harris said that sales in 2002 were stable despite the current local situation with some growth in the premium brand, Benson & Hedges. But the crime situation, he added, saw the closing of key outlets earlier than normal which affected the company’s growth pattern. Benson & Hedges sales grew by 31.5% and lights variants grew by 16% in 2002.
The report indicated that sales volumes for 2002 grew by 0.9% or 4 million sticks (of cigarettes).
As a result of improved internal efficiencies and cost reductions, operating expenses for the year 2002 fell by 1.3%, Harris’ review stated.
Harris noted that operational efficiencies coupled with the price increase had realised an increase in the earnings per share, which stands at $21.69 compared to $16.29 for 2001.
Bristol, Demtoco’s main brand, continues to be customers’ preferred brand and enjoys a market share of 98%.
Harris noted that the company continued to be a major contributor to the economy, with $1.2B, or 43% of the gross turnover being paid to the government in the form of corporation and consumption taxes. Dividend payments to investors, he said, amounted to 14% of the gross turnover or $417.4M.
According to Harris, 2003 was going to be a challenging one for the company if there was no significant improvement in the local situation. He said the firm would focus on improving internal efficiencies and reducing operating costs wherever possible to improve its bottom line.
He also indicated that the company would continue to contribute to social and economic development, in particular the protection of the environment. Last year, the firm sponsored a workshop on Guyana’s protected areas.
The Managing Director, in his report, stated that the company stood committed to the development of sensible regulations to address society’s concerns about tobacco products. He noted the adoption of the new marketing standards which ensured that the marketing and distribution of tobacco products were directed to adult smokers.
The company says it conducted research towards implementation of a Youth Smoking Prevention Programme during 2002.
All brand advertisements carry health warnings in compliance with the New International Marketing Standards. Also as a result of these standards, advertising has been stopped in magazines, television and radio. The company has also stopped sponsoring sporting activities and cultural events where non-adults may be present.