Imperial Tobacco NZ Full-year Profit Jumps 50% on Australian, Domestic Sales

Source from:  BusinessDesk 03/09/2016

Imperial Tobacco New Zealand, the local unit of the UK's Imperial Brands Plc, posted a 50 percent jump in full-year profit by increasing Australian and domestic sales while keeping a lid on controllable costs.

The maker of cigarette and tobacco brands including Horizon, JPS, Peter Stuyvesant, West and Drum reported profit of $30.7 million in the year ended Sept. 30, from $20 million a year earlier.

Sales rose to $553 million from about $476 million, with the government reaping the largest share by way of excise duty, which rose 17 percent to $376 million. Its tax bill rose 46 percent to about $12 million. Imperial is the nation's biggest cigarette maker since taking over the British American Tobacco site in Petone in 1999 and spending almost $50 million on a factory upgrade that allowed it to ramp up production to supply the Australian market.

"We can make more using the same cost structure," said marketing manager Brendan Walker. "We keep a keen eye on costs. We've increased volumes and market share in both the New Zealand domestic market and export markets."

Employee costs were little changed in the latest year at $24.6 million, while raw materials and consumables costs rose about 13 percent to $63 million. Other expenses, which weren't defined, fell 4.8 percent to $38 million. Notes to the accounts show expenses included about $8.2 million for "display payments and trade incentives", little changed from a year earlier, and related party fees of $14.7 million, up from $14.5 million.

The local company remits all surplus cash to its parent, which it also relies on for funding, at an arms-length interest rate of 5.61 percent, the accounts show. Loans from related parties stood at $42.8 million at Sept. 30, down from $60.4 million a year earlier.

Walker declined to comment on the potential of plain packaging being introduced in New Zealand. Like other tobacco companies, Imperial has battled the introduction of plain packs in Australia, which Walker called "the Australian experiment" which "from the figures and numbers and evidence I have seen have not been reaching the goals the government has set".

Instead, Walker says, plain packaging and increases in excise have fuelled the sale of black market tobacco in Australia that has resulted in a loss of government revenue of A$1.4 billion a year. Illegal tobacco accounts for about 15 percent of the Australian market and about 4 percent of New Zealand's and includes "chop chop loose-leaf tobacco sold in plastic bags, counterfeit and branded products, he said, citing figures collated by anti-smoking groups.

Imperial employs about 150 people at its Petone plant. Enditem