Home' Trinidad and Tobago Guardian : May 2nd 2013 Contents MAY 2013 • WEEK ONE www.guardian.co.tt BUSINESS GUARDIAN
STOCKS | BG15
Today, we continue to highlight the
results of companies with a December year
West Indian Tobacco Company Ltd
Witco s revenues, net
of excise taxes,
improved by 13.7 per
cent to reach $868
million from 2011 s
$763 million. The
company s gross profit margin also advanced;
this measure was 71.6 per cent in 2012 from
70.9 per cent recorded for 2011.
Despite a 29 per cent increase in distribution
costs to $20 million from $15.5 million in 2011,
operating profit advanced by 18.5 per cent to
$476.2 million from the previous period s
$401.9 million. Although the company s cash
resources at year-end improved from $100.8
million at the end of 2011 to $134.8 million as
at December 2012, its interest income fell to
$16 thousand from $21 thousand in 2011. This
decline reflects the trend that interest rates
on most deposit instruments have exhibited
in the recent past.
The company s effective tax rate declined
by 1.3 points to 26.5 per cent; the effective
rate in 2011 was 27.8 per cent. This helped it
to report an improved after-tax profit of $350
million; this result was 20.6 per cent greater
than the $290.2 million earned for 2011.
These figures translated into earnings per
share for 2012 of $4.16 versus $3.45 delivered
in 2011. Dividends for the year were $3.82 per
share and the increase was in line with the
net profit change. At a recent price of $97.00,
this share gives investors a dividend yield of
almost four per cent.
After its recent annual general meeting, the
company denied that it was in a monopoly
position. Of greater concern to both the man-
ufacturing and distribution businesses is the
vexing question of counterfeit products, which
reduce sales, damage intellectual property
rights and erode tax revenues.
Unilever Caribbean Ltd
Increases in selling and distribution costs
in the fourth quarter stymied Unilever s results
for that period causing its earnings per share
to slip to $0.80 from $0.81 for the comparative
period in 2011.
Nevertheless, Unilever s full year s results
showed sales improving to $567 million from
the 2011 base of $527.4 million; this reflected
an improvement of 7.5 per cent. Meanwhile,
its gross profit margin improved to 38.9 per
cent from 2011 s 37.2 per cent. This change
saw the gross profit figure move from $196.1
million in 2011 to $220.7 million last year. This
reflected a better control of the company s
cost of sales.
On the other hand, the changes in both
administrative and selling and distribution
cost increased disproportionately to the rise
in sales. Selling and distribution costs rose by
18.3 per cent to $110.4 million from 2011 s
$93.3 million. Included in this figure was an
additional $11 million spent on advertising and
promotions; this higher level of expenditure
is expected to increase brand awareness and
build customer loyalty. Higher sales in sub-
sequent reporting periods are expected to
result from this spending focus.
In a similar vein, administrative expenses
rose by 22.2 per cent from $25 million in 2011
to $30.5 million last year. Much of this increase
related to investments in systems and tech-
nology, the benefits of which would be seen
in the medium and long term.
Pre-tax profit for 2012 came in at $79.8
million, which was 2.8 per cent greater than
the $77.6 million reported for 2011. After allow-
ing for $20.3 million in taxes for 2012 the net
profit earned was $59.5 million; this result
was marginally higher than the $59.2 million
achieved for 2011. Earnings per share for 2012
came in at $2.27, or just one cent more than
2011 s $2.26.
In respect of the 2011 fiscal period, UCL
paid total dividends of $1.54. For 2012, it first
paid an interim dividend of $0.32 then, in
December 2012, it paid a special dividend of
$1.25. In April, the company declared a final
dividend for 2012 of $1.23; this brought the
total dividend in respect of 2012 up to $2.80.
At a recent price of $51.50, this gives share-
holders a yield of slightly over 5.4 per cent.
With a surplus of cash in its treasury relative
to its immediate needs, UCL seems to have
resumed returning some of this excess to
Flavorite Foods Ltd
Flavorite Foods acquisition of Romike Ltd
in early 2012 contributed to a rise in its revenues
by almost 57 per cent to reach $150.4 million
from 2011 s base of $96 million.
However, pre-tax profits fell to $0.81 million
from the $4.05 million recorded for 2011.
Almost all cost items saw increases during the
year. In addition, there were several one-off
items relating to the acquisition and integration
of the new subsidiary into the larger entity.
Fortunately, some of this decline was mit-
igated by a tax credit of $1.75 million; in 2011,
there was a tax payment of $1.75 million. Thus,
the after-tax profit for 2012 was $2.55 million
compared with the $2.29 million reported for
2011. This figure, before the special items men-
tioned later, reflects earnings per share of $0.33
for 2012 and $0.29 for 2011. A dividend of
$0.16 was paid in respect of both 2011 and
In 2011, there was a positive revaluation fig-
ure of $6.48 million, which helped boost com-
prehensive income to $8.78 million. In 2012,
there was a huge write-off of goodwill on the
company s books amounting to $17.34 million.
This one-time charge caused the company to
record a comprehensive loss of $14.79 million.
The chairman explains the company s deci-
sion in the following way: "In the current
audit climate, unfortunately, even reasonable
bases for such impairment tests are being
As such, the company has decided to take
a one-time write-off all the goodwill on its
(Although their reasons were different, we
recall that, in 2010, One Caribbean Media
wrote off goodwill of $244.4 million. Might
other companies have cause to follow suit?)
Thus, Flavorite is continuing its new and
enlarged phase of operations without having
to worry about any goodwill baggage.
National Flour Mills Ltd
NFM is a subsidiary of National Enterprises
Ltd. The company achieved a modest improve-
ment in turnover to reach $446.3 million in
2012 from $441 million in 2011; this represents
an improvement of a mere 1.2 per cent.
Even so, the fortuitous decline in world grain
prices for the first eight months of 2012 helped
this company produce a welcome profit. The
cost of sales declined from $375.3 million in
2011 to $356.9 million last year. This helped
NFM deliver an improved gross profit result
of $89.4 million. This outcome was $23.8 mil-
lion or 36.3 per cent higher than the 2011
figure of $65.6 million.
Administrative expenses, at $24 million,
were marginally lower than the $24.3 million
incurred for 2011. Also, other operating income
fell by $2 million to $8.6 million from the pre-
vious period s $10.6 million. The major increase
occurred in selling and distribution expenses,
which climbed by 18.5 per cent to $41.4 million
from the previous level of $35 million. All these
changes resulted in the 2012 operating profit
coming in at $32.6 million; this was 92 per
cent higher than the $17 million figure reported
Financial expenses rose to $13.4 million in
2012; this was 4 per cent more than the $12.9
million incurred for 2011. Thus, pre-tax income
closed at $19.1 million; this was an improve-
ment of 373 per cent over the $4 million
recorded for 2011. For 2011, NFM had an effec-
tive tax rate of 84.2 per cent; however, in 2012,
this fell to 30.3 per cent.
These changes allowed the company to
report an after-tax figure of $13.35 million;
this was an astronomical improvement (1,988
per cent) over the $0.64 million recorded for
2011. The totality of these changes allowed
NFM to deliver earnings per share of $0.11.
On that basis, the directors agreed to pay a
dividend of 8 cents per share. At NFM s recent
share price of $0.71, this gives investors a div-
idend yield of 11.3 per cent!
Grain prices increased in the last four months
of 2012, thus damaging profit margins; how-
ever, NFM opted not to immediately pass on
these increases to its customers. Instead, the
chair states that: "NFM, therefore, remains
committed to improving operational efficiencies
in order to reduce costs in an attempt to offset
these impending increases."
This decision seems to have borne some
positive results as NFM reported a modest
profit of $188k in its first quarter ending March
2013. This result compares with the loss of
$2.27 million incurred for the comparative
period in 2012. This profit was achieved despite
a two per cent increase in the average price
of grain in the first quarter.
Despite welcome improvements in opera-
tional efficiencies, it remains to be seen if
grain prices would remain benign as the year
Witco, Unilever, Flavorite and NFM
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