Guyana’s leading cigarette distribution firm, the Demerara Tobacco Company (Demtoco) recorded a 9.5% decrease in its profit before tax last year when compared to 2016.
`Chairman Marcus Steele, in his statement at the Annual General Meeting (AGM) Tuesday afternoon, said this poor performance can be attributed to challenges in the economy, the passage of the Tobacco Control Act and the institution of tax stamps for tobacco products.
According to the report, Demtoco in 2017 made a profit after tax of $1.4B while it raked in $1.5B in 2016 and $1.6B in 2015.
On the other hand, the profit before tax for 2017 is $2.5B when it 2016 it was $2.8B.
The 2017 Annual Report also showed that cash and bank balances declined, with $406M at the end of 2017 compared to $518M at the prior year-end.
Demtoco Chairman explained that the company experienced a 5% volume decline over 2016, with gross revenues also reducing by 4% when compared to 2016.
Steele said the company is bracing for more market fluctuations when the new law and taxation regimes come into full effect.
Currently, he said Demtoco is working with the Ministry of Public Health in becoming compliant with the new tobacco control legislation.
Demtoco had strongly resisted the passage of the Tobacco Control Bill 2017, on the grounds that there were certain clauses that were ambiguous and unfair.
The company maintains this position and in its Annual Report, stated that it is not opposed to regulating the sector. “We believe that regulations should be balanced and enforceable,” the Chairman said.
The other issue facing Demtoco is the introduction of tax stamps.
According to the Chairman, “while the Government views the introduction of the tax stamps as a tool to protect and increase their revenues from the tobacco industry”, there is another way to achieve similar results.
Steele explained that “the business had proactively implemented a tax code measure on its packaging to demonstrate to the authorities that there is a more cost-effective approach to track and trace the validity and authenticity of our products.”
The implementation of the tax stamps takes effect until September 2018 and so Steele made one last plea for the Government to adopt the alternative platform it has proposed.
Despite the challenges, Demtoco paid four interim dividend payments totalling GY$53.46 for the reporting period, with a final payment in the value of GY$7.07 in ordinary share.
Demtoco, according to the Chairman, remains the highest share price on the Guyana Stock Exchange.
