Lacking shareholdings and smokers, Carreras board pushes for growth
NONE of the members of Carreras Group's board own any shares in the cigarette distribution company. And only one director currently smokes.
However, the lack of share ownership and smokers on the board doesn't reflect their resolve to grow the constrained business, according to Carreras Group Chairman Richard Lewis.
"We had that conversation in respect to the shares this morning," said Lewis at Carreras's annual general meeting (AGM) held at the Jamaica Pegasus Hotel in Kingston on Wednesday. "Every director has his/her choice whether to own shares or not."
It's the first time in at least six years that no director holds shares.
However, even over that period only one director would hold shares at a time.
That includes Richard Pandohie's 109,000 stock units up to 2013, and Patrick Smith who resigned in 2010 and who had some 34,000 shares.
Lewis believes that share ownership by directors represented an advantage over other investors based on the availability of sensitive information.
It's a view inherited from his father.
"[My father] felt that the information he had on the performance, whether good or bad, the other shareholders did not have that, so he felt he would take the choice of not owning any shares," said Lewis. "As a good son I followed his advice and maybe it wasn't profitable but I think it was ethical."
When asked by the Caribbean Business Report how many of the eight directors smoke, only Colombian national Eduardo Castaneda acknowledged being a current smoker.
The chairman added: "For myself I stopped smoking 12 years ago. That means that I did about 30 or 40 years of business. I certainly contributed," responded the chairman to the query.
Cigarette packages sold by Carreras contain a chief medical officer warning that "Smoking is dangerous to health".
These and other warnings previously covered 30 per cent of the packages but were extended last year to cover 60 per cent.
It was part of a new set of public health labelling regulations.
During its last financial year the company faced the introduction of public smoking restrictions, which contributed to a 30 per cent fall in cigarette sales volumes.
During the three months to June 30, Carreras recorded its first revenue increase since new public smoking regulations were implemented last year.
It climbed by 20 per cent from year-earlier levels to $2.6 billion during the latest quarter reported on in 2014.
As a result, net profit climbed from $490 million to $590 million.
Carreras managing director, Marcus Steele, indicated that Carreras would continue focusing on stemming the illicit trade.
It cost the government $2 billion in lost taxes, according to the annual report for the year ending March 31.
"As you can appreciate the top line is challenged by regulation, illicit trade and especially counterfeit Craven A," Steele told shareholders. "We must win the fight against illicit trade because it will affect our volumes."
There are two categories of illicit cigarettes: those which are legally produced and imported illegally into Jamaica; and counterfeit products, illegally produced and imported.
Carreras generated $4 billion in net profit for its year ending March 2014, or roughly one-third less than the $6.4 billion 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.