NZ government reaps $385m from duty on Imperial Tobacco sales

The government received $385 million in duty on sales of Imperial Tobacco New Zealand, the local unit of UK tobacco giant Imperial Brands Plc, in 2016 as the company posted its highest sales since at least 2001.

Revenue at Imperial Tobacco NZ rose 1.7 percent to $554 million in the 12 months ended Sept. 30, slower than the 2.5 percent growth in duty, its annual accounts show. Raw material costs rose 3.5 percent to about $62 million. Once expenses and costs are taken into account, the company paid little-changed tax of about $12 million and delivered a steady profit of $30.5 million from $30.7 million a year earlier.

The company didn't respond to questions about its results, although there has been a change of personnel at the firm, the maker of cigarette and tobacco brands including Horizon, JPS, Peter Stuyvesant, West and Drum. A year earlier, it did put up a spokesman, who cited a $50 million upgrade to its factory in Petone that allowed it to boost production without sustaining higher costs, to supply the Australian market.

The local company remits all surplus cash to its parent, which it also relies on for funding. That was charged an interest rate of 3.5 percent in the latest year, down from 5.61 percent in 2015, the accounts show. It declared a dividend of $31 million, or $4.28 a share in 2016, up from $20 million, or $2.76 a share, a year earlier.

The British parent is listed on the London Stock Exchange and does release detailed financial statements, although New Zealand doesn't rate a mention. Australia is included in Imperial Brands' "returns markets north", along with the UK, Germany, Benelux, and the Ukraine, and which recorded first-half revenue of 1.3 billion British pounds, up 4.4 percent from a year earlier, while adjusted operating profit slipped 0.7 percent to 671 million pounds. In Australia, "we delivered another excellent performance focused on JPS and resulting in further gains in market share, revenue and profit," it said.

Its growth markets achieved a 22 percent gain in first-half revenue to 859 million pounds, for an adjusted operating profit of 211 million pounds, up 9.9 percent. Growth markets include Russia, Saudi Arabia, Italy, Greece, Sweden and Norway, Japan and Taiwan. The US market, broken out separately, posted a 10 percent gain in revenue to 785 million pounds and a 19 percent gain in adjusted operating profit to 457 million pounds. Imperial also has a group of markets it calls "returns markets south", which includes Spain, France, Algeria and Morocco and had revenue of 771 million pounds in the first half, up 4.9 percent, for an 11 percent gain in operating profit to 328 million pounds.

In total, Imperial Brands first-half revenue rose 9.3 percent to 3.7 billion pounds and operating profit rose 6.3 percent to 1.7 billion pounds, although in constant currency terms, revenue and operating profit were down 5.5 percent and 7.6 percent respectively in the first half. Its profit margin was 44.9 percent, down 150 basis points from a year earlier.

Its priorities for 2017 include 130 million pounds of cost savings, further rationalisation of its product range, increased development of electronic cigarettes (also known as vaping products).

(BusinessDesk)