CAR reports 1% decline in six months net profit

Date: November 13, 2019

Carreras Limited, for the six months ended September 30, 2019, reported Operating Revenue of $6.64 billion, 5% increase relative to $6.31 billion booked in 2018. The company highlighted that, “Our volume performance was negatively impacted, primarily in the month of September, by adverse weather conditions. The persistent rains affected the selling in cigarettes resulting in lost consumption moments.” Revenue for the quarter closed at $3.19 billion, compared to $3.16 billion reported for the second quarter of 2018.

CAR also noted that, “two major priorities for the Company for the 2019/2020 financial year, being the implementation of the new route to market structure, and the upgrade of the Matterhorn portfolio, have both had positive impacts on the business performance to date. In the case of the route to market, in keeping with the mandate to build out routes and thereby increase distribution coverage, several new customers have been added and there has been an improvement in sales volumes over the prior period.”

Management stated, “Since Mid-September 2019, the Matterhorn portfolio upgrade has achieved full distribution island-wide. We are confident that the investment in both our new route to market structure and in Matterhorn product innovation augurs well for the long-term sustainability of the business.”

Cost of Operating Revenue also climbed year over year by 6%, amounting to $3.34 billion from $3.16 billion. As such, Gross Operating Profit rose by 5% to total $3.31 billion relative to the $3.15 billion in 2018. Operating profit for the quarter amounted to $1.58 billion relative to $1.57 billion booked for the same quarter of 2018. Other Operating Income fell 26% moving from $43.82 million in 2018 to $32.24 million.

Administrative, distribution and marketing expenses increased 14% to total $1.03 billion (2018: $905.38 million). Investments in the Company’s new route to market structure and upgrading of the Matterhorn portfolio were related to the lion share of the increase. According to management, “heightened investments in our brands as well as increased route to market costs, both of which have begun to positively impact business performance.”

Interest income for the period amounted to $34.21 million, slightly up from the $33.44 million booked in 2018. Interest expense for the six month period closed at $5.64 million relative to nil in 2018.

Profit before Income Tax closed the quarter at $2.34 billion relative to $2.32 billion in 2018. Taxation of $590.60 million was incurred for the period (2018: $579.80 million). Consequently, Net Profit for the six months increased to $1.745 billion relative to $1.742 billion booked in 2018. Net profit for the quarter declined to $822.41 million versus $921.54 million booked for the second quarter of 2018.

The Earnings per share (EPS) for the period was $0.32 as compared to $0.30 for the corresponding period of last year. EPS for the quarter amounted to $0.50 (2018: $0.50). The twelve-month trailing EPS amounted to $0.70. The number of shares used in the computations amounted to 4,854,400,000 units. CAR’s stock price last traded on November 13, 2019 at $8.73.

Based on the improved performance for the quarter, the company states, “the Company continue its efforts to engage with the Government, impressing on them the need to implement a sustainable excise strategy in recognition of the direct relationship between frequent and excessive increases in taxes and the proliferation of illicit cigarettes. The illicit trade in cigarettes which continues to shift volumes from the legal trade also negatively impacts the Government’s tax collection and regulation efforts.”

Balance Sheet at a glance:

Total Assets amounted to $3.81 billion as at September 30, 2019, up from $3.54 billion reported in 2018. This was mainly due to an increase in Property, plant and equipment which closed at $530.15 million in contrast to $299.69 million as at September 30, 2019.

Shareholders’ Equity attributable to stockholders of parent amounted $1.53 billion (2018: $1.45 billion) with book value per share of $0.32 (2018: $0.30).


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