Apr 2007 Financial News

WITCO Releases First Quarter Results

Apr 23, 2007

Results for the First Quarter Ended March 31, 2007

For the First Quarter Ended March 31, 2007, The West Indian Tobacco Company Limited (WITCO) reported Earnings Per Share (EPS) of $0.46, which was up on the comparable quarter of FY06 by 8.92 per cent or 4 cents. As stated by the Chairman, “the solid result was driven primarily by improved sales performance in both the domestic and contract manufacturing markets”.

Turnover for the period under review increased by 10.14 per cent or $15.42 million over the same period last year, to end the quarter at $167.53 million. However, the Company saw a larger increase in Excise which rose 16.18 per cent or $6.95 million to $49.92 million. As a result, Q107 on Q106, WITCO’s Net Turnover saw a smaller increase of 7.76 per cent or $8.47 million when compared to Turnover and ended the period at $117.61 million. Additionally, Cost of Sales amounted to $34.93 million, up by 7.26 per cent or $2.37 million on the corresponding period of FY07. Consequently, Gross Profit for the quarter stood at $82.68 million, up by 7.98 per cent or $6.11 million on Q106. Also, it is interesting to note that for both Q106 and Q107, the Company maintained a Gross Profit margin of approximately 70 per cent.

WITCO successfully decreased Distribution Costs by 13.64 per cent or $0.23 million to end at $1.42 million; however Other Operating Expenses were not so easily controlled and increased by 10.38 per cent or $1.57 million to $16.64 million. Administrative Expenses saw a marginal increase of 1.56 per cent or $0.19 million from $11.96 million (Q106) to $12.14 million (Q107). Consequently, Operating Profit stood at $52.47 million and was up by 9.56 per cent or $4.59 million.

The Company saw more significant increases in Interest Income and Interest Expense. Interest Income for the quarter was $0.46 million, up by a significant 92.05 per cent or $0.22 million on Q106, while Interest Expense grew by 65.49 per cent or $0.32 million to end at $0.80 million. Thus, Profit Before Taxation increased by 9.41 per cent or $4.49 million on the corresponding period to end Q107 at $52.13 million.

The Effective Tax Rate for the period under review was 26.04 per cent compared to a Rate of 25.70 per cent for Q106. Therefore, Profit After Taxation stood at $38.56 million, up by 8.92 per cent or $3.16 million on the corresponding quarter in FY06.

The Directors have approved a first interim dividend of $0.22 per share payable on May 21, 2007 to shareholders on record at the close of business on May 14, 2007. The Register will be closed on the 15th and 16th of May, 2007.

WITCO is currently trading at a price of $25.66 on the local market. We have forecasted an EPS of $2.00 for the fiscal year ended 2007 and continue to maintain this forecast. At the current price and forecasted EPS, this share is trading at an attractive price to earnings multiple of 12.83 times. Additionally, using a multiple of 15 times and at the forecasted EPS of $2.00, this share has an expected return of approximately 17 per cent on the current price or a target price of $30.00. As such, we maintain our BUY recommendation.

Gia Singh
WISE Equity Research Team