Egypt's Eastern Tobacco to Generate Strong Growth

Source from:  Mena Report 03/01/2005

PrimeEgypt is expecting Eastern Tobacco (ET) to generate strong bottom line growth over both this year and next, pertaining to 36% and 50% respectively, driven by higher selling prices in FY05 and lower taxes in FY06. The new tax law, however, expected to be passed some time over the coming months is assumed to impact ET's effective tax rate in FY06, reducing its tax bracket from 32% to 20%, in conjunction with a removal of the current exemption on 10% of paid in capital. The net effect should be 40% lesser taxes. With plant facilities and warehouse construction underway in the new October site, PrimeEgypt foreseeS the transfer occurring in 2007 or 2008, improving operating efficiency and allowing for the application of further cost cutting schemes. Local cigarette ex-factory prices increased over 21% to LE0.93/pack in 1H FY05 compared to LE0.77/pack in 1H FY04 after the roll out of the relatively more expensive brands in April 2004, and their capturing of over 35% of ET's local cigarette sales. The increased ex-factory prices pulled total revenues up 21% to LE1.71 billion in 1H FY05. Net income grew by only 22.3% as a result of an excessively high effective tax rate booked in 1H FY05 of 49%. PrimeEgypt expects FY05, to witness 22.5% growth in revenues, while maintaining the 1H 27.8% EBITDA margin. Consequently, a 36% growth in is expected to LE358 million. Enditem