Contraband cigarettes, counterfeit tobacco hurting profitability -Chintamani

The operations of the Demerara Tobacco Company in Guyana last year netted  government revenues totalling more than $2.7  billion according to the company’s recently released annual report. According to the report the company last year paid $1,825,235,000 in duties and excise taxes and a further $959,574,000 in income taxes. Overall, DEMTOCO paid 48 per cent of its total income in taxes compared with 45 per cent in the previous year.

In a year when, according to Managing Director Chandradat Chintamani, more than half a billion dollars were lost to the public treasury primarily through smuggling, DEMTOCO, nonetheless, realized an after tax profit of $932,724,000, a $4.4 million dollar increase in profits over 2008.

In his review of the operations of the company in 2009 Chintamani noted that DEMTOCO had been affected by the twin factors of the global financial crisis and “illicit trade, smuggling and counterfeiting of tobacco.” Chintamani, who has, from time to time, articulated DEMTOCO’s smuggling-related challenges to this newspaper said in his 2009 review that the company will continue to work with the various state agencies including the Guyana National Bureau of Standards (GNBS), the Customs and Trade Administration and the task force responsible for the suppression of fuel smuggling and contraband “to eliminate the impact of smuggling on our business.”

According to the report DEMTOCO realized a turnover of just over $5b, an increase of 2.7 per cent over the previous year.

Despite its smuggling and contraband woes, however, DEMTOCO’s operations have reflected a continuous after tax profitability, increasing from $572,854,000 in 2005 to more than $900m at the end of last year. Last year earnings per share moved to 39.86 from 39.67 in the previous year though dividends per share slipped from 53.12 in 2008 to 39.26 last year. Last year the Board of Directors of DEMTOCO declared and paid to shareholders three interim dividends totalling $22.94 per share and a final payment of $16.32 per share is expected to be paid shortly.

Meanwhile, Board Chairman Patrick Smith also alluded to concerns associated with smuggled tobacco linking the smuggling of tobacco to “internationally organized crime and terrorism.” Smith said that the smuggling of tobacco was a trade which is already a global problem and set to grow. “We fully support regulators, governments and organizations such as the Task Force on Fuel Smuggling and Contraband ………in seeking to eliminate all forms of illicit tobacco trade.”

In his 2009 review Chintamani alluded to the health risks associated with tobacco adding that DEMTOCO supports the regulation of tobacco in appropriate ways. “We support and want to help deliver balanced tobacco regulation, we want to participate and support governments with advice on and compliance with effective future laws.”

According to Chintamani, in 2009 DEMTOCO worked closely with the Guyana National Bureau of Standards on the development of new packaging regulations for Guyana. DEMTOCO is calling for the alignment of these new regulations with the Caricom Standard on Tobacco Labelling.