Carreras' Managing Director, Michael Bernard.
CARRERAS DISCONTINUED its local manufacturing operations in November, 2005 and now concentrates on importing and distributing cigarettes in Jamaica. Carreras also sold San Souci thereby creating a leaner, more efficient entity dedicated to the tobacco operations that boast operating profit margins close to 50 per cent.
The major appeal of this stock is its propensity to pay healthy dividends (in excess of 60% of earnings) - a position likely to be enhanced since the firm has offloaded the costs associated with the manufacturing operations.
Still, Carreras could be called upon to pay over some $5.7 billion in income taxes to the GOJ on behalf of Cigarette Company of Jamaica, a former subsidiary. Payment of this magnitude would effectively erode equity by close to one-half and thereby impair the firm's ability to pay dividends in the medium term.
However, assuming no final ruling in 2006, the new-look Carreras Group should see rising profits in the New Year and could therefore be a prime investment for one's portfolio.
