AfricaPress-Tanzania: TANZANIA Cigarette Company (TCC) has posted strong performance results in 2019, maintaining its gross and net profit margins at 56 per cent and 16 per cent respectively, from the prior operating year.
According to Tanzania Securities Limited (TSL) commentary on the TCC 2019 financial results, the company recorded increases in revenue and in operating expenses, but the latter at a lower rate to signify improved cost efficiencies.
“Increase in revenue was mainly due to pricing methodology adopted in the domestic market and robust volume growth especially in the Democratic Republic of Congo (DRC) which happens to be the main export market for the company,” said TSL.
TCC has reported a 5.2 per cent increase in annual revenue to 309.8bn/- in the period ended December 2019 from 294.3bn/- registered in the previous year.
Cost of sales rose by 4.4 per cent to 133.9bn/- while gross profit increased by 5.9 per cent to 175.9bn/- as the results of better pricing in the domestic market and increased volume in the company’s main export market of the DRC.
The total operating expenses increased at a lower rate of 3.3 per cent to 97.7bn/- leading to profit before tax of 78.2bn/- for the year 2019, a 9.4 per cent increase compared to 2018.
Due to a 14.4 per cent rise in tax payout, the bottom line increased by 6.9 per cent to 51.2bn/- from 47.9bn/- recorded in 2018. Earnings per share increased to 512/- per share from 479/- per share.
The balance sheet remained generally stable with total assets of the company increasing only marginally by 0.8 per cent to 268.6bn/- from 266.6bn/- mainly due to a 36.4 per cent increase in cash and bank balances for the year translating into increased operating cash flow to support company growth and indication of earnings quality.
Shareholders’ worth declined marginally to 187.14bn/- from 190.19bn/- mainly due to the decrease in retained earnings to 179.26bn/- from 183.02bn in the previous year.
The Board of Directors resolved to pay final dividend amounting to 250/- per share summing up to a total of 550/- per share paid for the year 2019.
The balance will be paid on or about May 7, 2020. Return on Assets for the company increased to 19 per cent from 17 per cent while, return on shareholders’ contribution rose to 27 per cent from 25 per cent.
Despite these promising results, the TCC stock has been relatively illiquid with limited volume and price movements.
The stock remained flat closing at 17,000/- on the bourse since May 2018 with moderate to low demand. The likelihood is of not increasing liquidity/ activeness despite the 22 per cent increase in dividend to be paid for the year 2019.
“Whereas the DSE and the market at large recently adopted the Environmental, Social and Governance (ESG) reporting with all stakeholders being encouraged to prepare sustainability reports, the Cigarette Company started to implement that before the regulators (CMSA and DSE) signed it as the regulatory compliance requirement.
The company plans to reduce greenhouse gas emissions, water withdrawal and waste by 13 per cent by 2023. Also, as far as sustainability of investment is concerned, 1,300 people benefited from the TCC Community Investment programme.
Through 5 projects partners the company invested 326m/-and volunteered 1,457 man-hours in various community initiatives. “Our stance on the company is a bear market trend.
Our blended valuation model comes up with a share price of 10,700/- which is a 37 per cent downside from the current closing share price,” TSL said when recommending a mid-term sell position on TCC.
