Sabrina Gordon, Business Reporter

Michael Bernard ... plans to lead Carreras to even higher profit. - File

Carreras Limited has been busy doing what it has for a long time done very well: make money.

For the six-month period to September, the company increased its gross operating profit by a whopping 38 per cent, to $2.73 billion, from the $1.98 billion from the comparative period a year earlier.

Net profit for the same period, at $1.99 billion, was up a remarkable 62.4 per cent. A substantial $929 million of the net profit for the six-month review period came in the second quarter — an increase of 61 per cent compared to the similar quarter for 2006.

The latest six-month profit was on revenue of $4.15 billion, a 28 per cent jump on the corresponding period last year.

Contain costs

Significant, too, has been Carreras' capacity to contain its costs, which, year-on-year, were up 12 per cent and the efficiency with which it translates income into profit. For example, its earning per share (EPS) for the six-month period, increased a staggering 62.3 per cent, from $2.52 to $4.09 per share.

"The business is now more focused with more effective management, including a containment in our overheads as we continue to grow our core business of marketing and distribution of our local and international tobacco brands," said Carreras' managing director, Michael Bernard.

A subsidiary of British America Tobacco (BAT), Carreras earlier in the decade closed the cigarette manufacturing plant in Jamaica, consolidating production in Trinidad.

The company also pulled out of other non-core businesses, selling of hotel properties as well as biscuit manufacturing and packaging enterprises.

According to Bernard, the latest result was the kind of benchmark Carreras intended to set itself for the future, with focus on effective management, customer service and support and the availability of products.

But enhanced efficiencies apart, Carreras has also benefited from its substantial cash mountain, from which it returned most of its interest and 'other investment income' of $542 million, a 68 per cent increase over the previous year.

Yet even with these results, analysts say Carreras had underperformed on the market, trading at only 8.4 times its earnings. In fact, they say, Carreras will with relative ease absorb a recent court ruling that it was liable for $2.17 billion in taxes for the period between 1997 and 2002. The court held that the tax authorities were right in their claim the payments by its subsidiary, the Cigarette Company of the Jamaica were distributions and not loans as booked by Carreras.

"The company clearly has had an improved quarter year-on-year," said Neilson Rose, equity manager at Mayberry Investments Limited. "What is most noticeable is that the company is able to show increased profits even when they have made the transfer of the sum of the judgement handed down by the courts."

Added Rose: "The company still is very cash-rich and could well be set for another big dividend payout early next year."