The Demerara Distillers Limited (DDL) Group registered after-tax profit of $2.191 billion for 2016, a 16% increase over the previous year’s figure even though it withdrew entirely from the bulk rum market.
In his report contained in the 2016 annual report, Chairman Komal Samaroo noted that the 2016 after-tax profit was $296 million higher than the 2015 figure of $1.895 billion. Taxation for the group in 2015 was $901.4 million compared to $728.6 million last year.
Noting that commodity prices had bottomed out in 2016, he said the bulk rum aspect of the DDL business was not spared. He adverted to his 2015 report to shareholders where he had reported the company’s withdrawal from segments of the bulk rum market that were no longer contributing to profitability. This, he said, led to a 43% decline in bulk rum export revenue. In this year’s report, Samaroo disclosed that the company exited completely from the market but retained the capacity to re-enter “if and when economic circumstances presented profitable opportunities in the future”.
Notwithstanding the withdrawal from the bulk rum market, Samaroo said that the overall group turnover for the year increased slightly by $89 million or 0.5%. He said that higher sales from branded products and high value bulk rum fully compensated for the sales lost from the unprofitable bulk rum segment.
Revenue from international sales of brands and high value bulk rum rose by 9.5% last year compared to the previous year. Domestic revenue grew by 2.6% compared with 2015. Samaroo said that the introduction of the Diamond Reserve brand in regional and international markets began in 2016 and will continue this year. “The brand was well received and we will continue to carefully promote and reinforce its market position in the value segment until it carves its niche in the rum market,” Samaroo said.
The Chairman said that the positioning of the El Dorado brand was strengthened in April 2016 when the company launched an ultra-premium limited edition to mark Guyana’s 50th anniversary of independence. Towards the end of 2016, there was the launch of the El Dorado Rum Cream liqueur in butter pecan.
As it relates to the group’s subsidiaries, Samaroo reported that Distribution Services Limited registered a profit before tax of $358 million compared with $313 million in 2015.
Demerara Shipping Company Ltd saw a profit of $102 million compared with $146 million in the previous year. Samaroo said that the decline was mainly due to the reduced cargo handled by the lines represented by the shipping company.
Tropical Orchard Products Co. Ltd (TOPCO) registered a loss of $16 million in 2016 compared to a profit of $20 million in 2015. Samaroo said that this was due to the loss of the school feeding programme contract which TOPCO subsequently challenged and won at the Bid Protest Committee (BPC). However, the BPC did not have the power to reverse the contract and TOPCO had to write off inventory totaling $21.2 million in packaging material and finished product.
Samaroo said that overseas subsidiaries also performed well, contributing $185 million in profit before taxation compared with $172 million in the previous year.
The Chairman also reported on the company’s settlement of a consumption tax claim with the Guyana Revenue Authority (GRA) dating back to 2002.
“The Company and GRA mutually agreed to fully and finally settle all claims by the GRA and liability by DDL for both Consumption and Excise Tax up to March 9, 2016 in the sum of $1.5 billion payable over twelve months from April 2016 to March 2017. During the year, payments towards this settlement totaled $1.2 billion. The balance will be paid before March 31st 2017,” Samaroo said.
Capital expenditure during the year amounted to $930 million and was channelled towards information and communications technology, improvement of production, storage and transportation infrastructure and the replacement of power generation equipment.
In a bid to lower the cost of power generation, Samaroo said that the Group facilitated a pilot project on the use of liquefied natural gas in place of heavy fuels at its Diamond facility. The pilot project is ongoing.
An interim dividend of $0.16 was paid in December 2016 and the directors have recommended a final dividend of $0.47. Basic earnings per share in dollars in 2015 was 2.46 compared to 2.85 in 2016.
The company’s annual general meeting will be held on April 7, at 4.30 pm at Plantation Great Diamond, East Bank Demerara.