Business

Carreras sees rise in revenue, profit

Wednesday, August 13, 2014    

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CIGARETTE distributor, Carreras Group, recorded its first revenue jump since the public smoking ban.

However, the company expects public smoking restrictions to continue to constrain growth in sales volume.

"We anticipate that volumes will be challenged for the rest of the year as the tobacco regulations have impacted the consumption of our products," said Chairman Richard Lewis in a statement accompanying the results.

The company made $2.6 billion in total operating revenue for the three months to June 30. That was 20 per cent higher than the $2.15 billion in sales generated in the comparative period last year.

As a result, net profit climbed from $490 milion to $590 million. The increase in earnings represented the second quarter of year-on-year rise in profit since new health regulations were introduced last year July.

Since the smoking ban

was implemented, Carreras's operating revenue dramatically fell by 16 per cent in the September 2013 quarter to $2.2 billion; then dipped 2.1 per cent in the December quarter to $3.6 billion; and declined 15 per cent in the March

2014 quarter.

Some requirements of the new health law were relaxed since being first introduced last year.

Parliament revised the measures to allow designated smoking areas in hotels; and reducing the graphic health warnings to occupy some 50 per cent rather than 75 per cent of the top, front and back of cigarette packaging.

In any case, Carreras also faces a weak economy and competition from a vibrant illicit cigarette trade.

Estimates place the loss on taxes from smuggled and counterfeit cigarettes entering the Jamaican market at $2 billion.

Carreras previously reported that it continued to see an upsurge in the presence, quantity and distribution of counterfeit Craven 'A' within the Jamaican market.

The cigarette distributor earmed $4 billion in profit for its year ending March 31, 2014, or roughly one third less than the $6.4 billion it made a year earlier.

During its financial year, Carreras started receiving payments from Government in regard to the over $3.5 billion award in its legal fight against Tax Administration Jamaica (TAJ), previous financials indicated.

In 2004, Cigarette Company of Jamaica (CCJ) received assessments for income tax claimed by the tax authorities for the years 1997-2002 amounting to $5.68 billion, including penalty and interest but appealed the assessment.

Whilst the appeal was in progress, CCJ paid an amount of $1.73 billion to TAJ. CCJ appealed the assessment and on March 13, 2012, after a volley of judgements and appeals in lower courts, the Privy Council handed down its decision dismissing the appeal of the TAJ with costs to CCJ.

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