Nov 2007 Financial News

WITCO Releases Nine Months Results

Nov 06, 2007

West Indian Tobacco Company Limited (WITCO)
Results for the Nine Months Ended September 30, 2007

For the Nine Months (NM) Ended September 30, 2007, West Indian Tobacco Company Limited (WITCO) reported Earnings Per Share (EPS) of $1.41, up 10.16 per cent or 13 cents on the corresponding EPS for NM06. Q307 on Q306, the Company’s EPS was up 9.30 per cent or 4 cents from 43 cents to 47 cents. The Chairman has stated that the growth was driven primarily by improved sales performance in both the domestic and contract manufacturing markets.

Turnover for the period under review was $514.23 million, an increase of $50.44 million or 10.88 per cent on the comparable figure in FY06. Q307 on Q306, Turnover was up 6.77 per cent from $160.10 million to $170.94 million. NM07 on NM06, Excise increased by a larger margin of 18.52 per cent to end the period at $156.87 million. Thus, Net Turnover ended the Nine Months at $357.36 million, up 7.83 per cent or $25.94 million on the comparable figure in FY06. Q307 on Q306, this figure was up a small 3.51 per cent as Excise increased by 15.05 per cent over the same comparative period.

Cost of Sales totaled $103.29 million for NM07, an increase of 5.05 per cent on NM06. Thus WITCO’s Gross Profit for the Nine Month period amounted to $254.08 million, up 9.00 per cent on the same period in fiscal 2006.

Administrative Expenses amounted to $43.92 million and was the largest Expense for the period while also seeing the largest percentage increase of 14.84 per cent, NM07 on NM06. Q307 on Q306, this Expense rose by 22.14 per cent. Other Operating Expenses amounted to $43.03 million; however WITCO managed to bring this figure down by a marginal 1.32 per cent on the comparable figure for NM06. While Distribution Costs increased by 10.01 per cent or $0.56 million from $5.56 million (NM06) to $6.11 million (NM07). As such, Operating Profit ended the period under review at $161.01 million, up 10.51 per cent or $15.31 million on the corresponding period in FY06.

Interest Income for NM07 was $1.16 million, down 4.05 per cent on NM06, while Interest Expense stood at $2.43 million, up 21.54 per cent or $0.43 million on the same period in the last financial year. Thus, Profit Before Taxation ended the period at $159.75 million compared to $144.92 million for NM06, an increase of 10.24 per cent.

The Effective Tax Rate for the period under review was 25.77 per cent compared to a similar Tax Rate of 25.55 per cent for the comparable period in FY06. As a result, Profit After Taxation stood at $118.59 million for NM07, up 9.91 per cent or $10.69 million on the same period in fiscal 2006.

The Board of Directors has approved a third interim dividend of 36 cents per share payable on November 21, 2007 to shareholders of record at the close of business on November 14, 2007.

WITCO last closed at a price of $27.05 on the local exchange. We are revising our Forecasted EPS downwards to $1.90, which at the current price translates into a price to earnings multiple of 14.24 times. Given that this share usually trades between 14 to 15 times, we recommend a HOLD at this time.

Gia Singh
WISE Equity Research Team