During the year under review the company generated highest ever operating profit and improved margins. The pretax and after tax profit were lower than preceding year because of "other expenses" which included staff separation cost and obsolete machinery write off.
On the other hand the company made solid investment in modernisation of plant and machinery which developed its capability to manufacture world class products like Benson & Hedges.
The Board recommended a final dividend of 10% which represents 80% of the net profit after tax. Both its manufacturing facilities and leaf processing plant have been recertified with ISO 14001.
It continues to focus on the re-engineering key processes. It applied automated attendance systems for factory staff through a state-of-the-art IT solution which is fully integrated with pay roll system.
British American Tobacco (Investments) Limited (incorporated in UK) is the Holding Company of Pakistan Tobacco Company Limited.
The company is incorporated in Pakistan and listed on the three stock exchanges of the country. It is engaged in the manufacture and sale of cigarettes.
At present the Pak Tobacco shares are trading at Rs 47.60 carrying 376% premium over the par value of Rs 10. During the last one year the price of the share appreciated by 191% to Rs 56.75 from Rs 19.50 per share.
The company's share has increased substantially from year-end price of 2001 at Rs 10.5 per share. The significant rise in the market value of the share is due to a number of factors.
The company posted operating profit of Rs 1,010.27 million, highest ever in its history. However profit before taxation at Rs 614.70 million (2000: Rs 729.94 million) and profit after taxation at Rs 321.08 million (2000: Rs 420.30 million) are lower vs. 2002.
This was due substantially higher "other expenses" on account of "staff separation cost" and obsolete machinery write-off.
The managing director of the company Jeremy David Pike rightly emphasised that this is a very solid financial performance considering the extremely challenging circumstances facing tobacco industry of the country.
The company has been able to show improved financial performance in 2003 despite no price increase this year, continuous pressure on its low category brands by the cheap, low quality offers from the resurging tax evaded sector. The company incurred higher marketing expenses to support its brands.
In case of financial charges the expense has sharply reduced to Rs 91.95 million from Rs 195.51 million in the preceding year.
The other significant feature is that the company continued to modernise and automate its manufacturing facilities and made its highest ever investment of Rs 569 million in plant and machinery out of total investment of Rs 854 million in fixed assets.
As a result the company achieved higher levels of quality and productivity and demonstrated the remarkable capability to manufacture world class products like Benson & Hedges.
The other milestones are that it made part repayment of long term loans. Above all made announcement for cash dividend for the second consecutive year after several years of losses.
Furthermore the company generated Rs 49 million more cash from operating activities in 2003 as compared to last year mainly due to higher concentration of sales in the premium and medium segment brands and so improved gross margins way.
The most important feature of the management has been maintaining its focus to re-engineer its key processes to further improve efficiencies and eliminate non value adding activities.
Key process changes initiated during the year included re-engineering of procurement processes and alignment of the organisation around an efficient and robust Supply Chain structure.
The management implemented an automated attendance system for factory staff through a state-of-the-art IT solution which is fully integrated with the company's payroll system.
The company introduced New Corporate Identity which is reflected in sunburst logo which reflects its rich heritage, enterprising spirit, dynamism and above all good corporate citizenship.
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Performance Statistics (Million Rupees)
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December 31 2003 2002
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Share Capital-Paid-up: 2,554.94 2,554.94
Reserves & Profit: 298.15 232.57
Shareholders Equity: 2,853.09 2,787.51
L.T Debts: - 200.00
Deferred Taxation: 370.63 120.63
Current Liabilities: 4,075.04 3,562.27
Tangible Fixed Assets: 3,410.89 3,013.21
Investment in Subsidiary Company: 5.00 5.00
L.T Loans: 16.48 10.00
L.T Deposits & Prepayments: 6.94 14.90
Current Assets: 3,859.45 3,627.30
Total Assets: 7,298.76 6,670.41
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Sales, Profit & Pay Out
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Turnover: 22,572.25 20,555.50
Gross Profit: 2,871.54 2,504.83
Operating Profit: 1,010.27 952.06
Other Income: 6.72 11.86
Financial (Charges): (91.95) (195.51)
Other (Expenses): (310.33) (38.42)
Profit Before Taxation: 614.70 729.94
Profit After Taxation: 321.08 420.30
(Dividend) Cash @10% (2000:@8%): (255.49) (204.40)
Earnings Per Share (Rs): 1.26 1.65
Share Price (Rs) on 14.06.2004: 47.60 -
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Financial Ratios
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Price/Earning Ratio: 37.78 -
Book Value Per Share: 11.17 10.91
Price/Book Value Ratio: 4.26 -
Debt/Equity Ratio: 0:100 1:99
Current Ratio: 0.95 1.02
Asset Turn Over Ratio: 3.09 3.08
Days Receivables: 2 2
Days Inventory: 60 65
Gross Profit Margin (%): 12.72 12.18
Net Profit Margin (%): 1.42 2.04
R.O.A (%): 4.40 6.30
R.O.C.E (%): 9.96 13.52
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Capacity & Production (Billion Cigarettes)
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Annual Capacity: 27.942 27.247
Actual Production: 24.639 24.110
Utilised Capacity (%): 88.18 88.48
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"Actual Production was sufficient to meet market Demand"
COMPANY INFORMATION: Chairman: Najmus Saquib Hameed; Managing Director & CEO: Jeremy David Pike; Head of Legal & Company Secretary: Tajamal Shah; Registered Office: Evacuee Trust Complex Agha Khan Road Sector F-5/1 P.O. Box 2549, Islamabad-44000
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