Red Stripe's brewery on Spanish Town Road. - File

A four per cent increase in sales volume for Red Stripe, driven by a positive turnaround in domestic sales, was not enough to absorb the 270 per cent increase in tax charges faced by the local brewer for the three months to September 30.

The charges dragged down the brewer's bottom line by nearly a third when compared to the corresponding quarter last year.

It returned net profit of $207 million from $2.6 billion in revenue during the review quarter, compared to net profit of $293 million from $2.4 billion sales - reflecting a 30 per cent decline in net profit against a nine per cent increase in sales.

Pre-tax profit was eight per cent higher than the comparative period last year, but taxation totalled $157 million during the quarter, or 268 per cent higher than the three months to September 30, 2005.

The beer maker's stock fell $1.03 to $7.97 in market trading Tuesday.

The September quarter was the first time since mid-2002 that the company had to pay all its taxes, having received a five-year tax-break in late 2001 to accommodate the beer manufacturer's expansion and modernisation.

Red Stripe saved $2.5 billion during the tax holiday, while it spent $2.7 billion improving its facilities, a move which would have facilitated the company's export drive.

But while export volumes have had significant growth over the last three years, to bolster volumes against a fall-off in domestic sales, the September quarter saw a dramatic turnaround in both geographical markets - domestic volumes went up 13 per cent, while exports dropped by 10 per cent when compared to the comparative quarter last year.

Four per cent decline

The September quarter last year saw a four per cent decline in domestic volumes, so the 13 per cent improvement for the period under review represents an eight per cent increase over 2004 levels.

The dramatic turnaround was attributed to "the effectiveness of the company's new sales and distribution strategy which was implemented towards the end of the previous financial year," according to Red Stripe in its report to shareholders submitted on Monday to the Jamaica Stock Exchange (JSE).

But the increase in volume take up by the local market only translated into a four per cent increase in overall volumes, as export volumes saw a 10 per cent decline during the period, which according to Wednesday Business estimates placed exports at 39 per cent of output during the September quarter last year, which would have dropped to 34 per cent of the total during the review quarter.

The falloff in exports was attributed to two factors - higher shipments up to the end of June this year lead to lower demand for Red Stripe imports into the U.S., while a one-off shipment of Guinness to Trinidad that showed higher numbers last year September was not replicated this year.

"Shipments to the U.S. declined by eight per cent as that market had a stock build-up following higher shipments in previous period," said the company. "At the same time, actual demand in the U.S. continued to grow, resulting in increased sales of 10 per cent by the importer into that market."

Added Red Stripe: "Exports to other markets declined by 19 per cent as the similar period last year benefited from one-off shipments of Guinness to Trinidad."

camilo.thame@gleanerjm.com