Tanzania: TCC Profit Drops On Increased Excise Duty

Source from:  Tanzania Daily News  10/08/2014

Tanzania Cigarette Company (TCC) has reported a 20 per cent drop in its net profit for the first half of 2014 as it is hit hard by increased excise duty on tobacco products.

TCC, which is listed on the Dar es Salaam Stock Exchange (DSE), recorded a net profit of 35.3bn/- for the six months ending June 30, 2014 down from 44.3bn/- it recorded in the same period last year, according to its financial statement.

The gross profit declined by 10 per cent to 86.8bn/- for the first six months of the year from 96.9bn/- obtained in a similar period last year.

"Whilst our volume grew by 5.2 per cent in the first half of 2014; financial performance to June 30, this year was lower than the corresponding period in 2013," the TCC Chairman and Chief Executive Officer, Majd Abdou said in the statement.

He said the results were a cumulative negative impact of high excise tax increases since July 2012, inflation adjusted products cost and operating expenses.

"The cumulative impact of high excise tax increases since July 2012, inflation adjusted products costs and operating expenses, negatively impacted results to June 30," he said.

"Excessive excise tax increases triggered massive consumers down-trading to more affordable low margin brands. The latter was the main catalyst behind profitability erosion."

The cigarette maker generated a 59.5bn/- in cash flow, of which 18.2bn/- was used to pay corporate tax to June 30, 2014 and a final gross dividend of 45.0bn/- for the year ended December 31, 2013.

The company is also projecting that the 25 per cent excise tax increase effective July 1, 2014 will put further pressure on profitability in the second half to December 31, 2014.

"To partially mitigate the tax impact on consumer affordability and profitability the company took marginal pricing in July. We will continue driving our strategy to prevent further down-trading, improve our operating margin and sustain our profitability," he said. Enditem