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Carreras looks to revive San Souci for new distribution, says no to ganja

Published:Friday | September 7, 2018 | 12:00 AM
Marcus Steele, managing director of Carreras Limited.

Cigarette trader Carreras Limited plans to revive its dormant resort company and put it to other uses as the vehicle for the introduction of new business lines.

The company that year in and year out speaks of the tax burdens imposed on its products by the Jamaican government, is sitting on $700 million of tax credits - which CEO Marcus Steele said is due to the dormant Sans Souci Limited - and is looking at ways to claim it.

The Carreras head disclosed the plan to revive Sans Souci in response to a query at the company's annual general meeting on Wednesday. He later told the Financial Gleaner that research was still under way on the company's precise use, but that Carreras was thinking of leveraging its marketing and distribution network to add other products used by cigarette purchasers, including lighters.

Reviving Sans Souci would allow the company to tap the tax credits, he added.

Carreras wound down Sans Souci after selling its interest in the hotel property it owned - the Sans Souci hotel - to Lee Issa's Couples resort for $1.2 billion in 2005, previous newspaper reports show.

In his presentation to shareholders, Steele said the cigarette company is also looking at adding new products in the Jamaican market, but noted that non-smokables introduced elsewhere had poor market acceptance in the island.

Steele also emphasised that Carreras had no interest in exploring sales of ganja sticks, saying commercial sale of the weed is illegal and it is only used for medicinal purposes.

Its newest product, Fyah Grabba, was launched during the past financial year as the first of its kind in the local market.

At the annual meeting in Kingston, Steele reported a 37 per cent spike in the company's market value following a stock split that, he said, resulted in $17 billion in additional wealth for shareholders in the June quarter.

The company itself made less profit at year ending March 2018 of $3.48 billion, compared with $3.8 billion in FY2017. Operating revenue fell seven per cent to $12.55 billion.

Steele said the Government's desire to go after an additional $800 million in special consumption taxes led instead to shortfalls, as Carreras' revenue fell by a billion dollars under the twin impact of more expensive sticks and an influx of illegal merchandise.

Carreras' consumption tax bill was $5.4 billion for FY 2018, down from $5.9 billion the previous year, due to the billion-dollar drop in revenue.

The consumption tax, which is charged against top line sales, was increased by 21 per cent to $3 per stick in March 2017. Steele also reported that smuggled cigarettes were taking a 25 per cent bite of the market.

For the first quarter ending June 2018, Carreras sales spiked from $2.8 billion to $3.1 billion, and the cigarette trader paid higher consumption taxes of $1.36 billion as a result, up from $1.2 billion in the same period for 2017. Profit rose from $758 million to $821 million in the quarter.

Subsequent to those results, shareholders collected sizeable dividends amounting to $1.31 billion at the end of August, more than half of which related to the final distribution from the liquidation of subsidiary Cigarette Company of Jamaica.

The Carreras stock is now trading at around $9.50 per share, valuing the company on the market at $46 billion.