Demtoco records $2.8B in profits for 2016

The Demerara Tobacco Company Limited (Demtoco) registered a before-tax profit of almost $2.8B for 2016, representing a slight decline from the previous year.

This was disclosed on Wednesday by Chairman of the Board of Directors Felicio Ferraz during the company’s 83rd Annual General Meeting, which was held at the Pegasus Hotel.

According to Ferraz, though the company was faced with challenges common to those encountered by other business entities within the private sector, it was able to deliver a profit before tax of $2,786, 972,000, representing a decline from the before tax profit of $2,851,375 recorded in 2015. The company’s after-tax profit for 2016 was $1,560,262,000, compared with $1,606,534,000 in 2015.

In terms of income distribution, 46% went towards taxes and 22% towards dividends with another 5% to royalties.

Felicio Ferraz

Commenting on the challenges faced, Ferraz highlighted Guyana’s decline in the growth rate of its Gross Domestic Product (GDP) as well as the existence of illegitimate businesses that partake in smuggling. He said the widely-available smuggled brands of cigarettes, which avoid the tax net of the revenue authority and do not comply with existing product regulation, made it exceptionally difficult for the company.

With regard to the decline of Guyana’s GDP, the chairman said, “For the third consecutive year the country of Guyana has experienced a decline in the growth rate of its GDP from 5.2% in 2013 to 2.6% in 2015. The primary influences were attributable to the performances of the main economic sectors, in particular gold, rice and sugar.”

Additionally, he said some inflationary pressure was seen in the local economy, as evident by the country’s change from a deflationary position in 2015 (1.8%) to having an inflation rate of 1.3% in 2016. Moreover, there has been a significant reduction in total consumer and business consumption (as a percentage of GDP) from 70.3% (2012) to 56.4% (2016).

Against this background, Ferraz said the company’s portfolio performance last year reflected the need by consumers for more affordable offers.

“Fortunately, your company has made a substantial investment in a sustainable portfolio of products catering for discerning Guyanese consumers.

One of our Global Drive Brands, Pall Mall, acted as an obvious choice for Dunhill & Bristol consumers who are seeking quality products at a lower price.

The impact on revenue was a reduction reflecting a 2% year-on-year decline,” he noted.

Meanwhile, Managing Director Maurlain Kirton pointed out that while the company does not oppose competition, there should be a balanced playing field.

“I’m sure you are aware of comments in the public domain regarding an impending tobacco bill, however while the company is supportive of the passing of the bill, our concerns have to do with the need for a balanced regulation,” she said.

Ferraz added the company will persistently engage regulators with respect to the introduction of balanced regulation which safeguards consumers’ right of choice and smoking experiences.

With regards to dividends, Ferraz said, the Board of Directors approved the fourth interim dividend of $12.62 per share which, together with a proposed final dividend of $8.63 per share, brought the total dividend for the year to $66.68 per share. This represents a return of 6.5% on current share price.

Once the final dividend is approved, payment will be made in accordance with the established company guidelines, he added.

“The economic, business and wider environment continues to remain challenging for 2017. However, I am fully confident that with the vision and guidance of the Board of Directors, the exceptional execution and delivery of both management and staff, our resilient portfolio and the continued focus on inefficiencies, the company will progressively drive and sustain shareholder value for years to come,” he further said.

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