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RAM: On the Line - Annual Report - Demerara Tobacco Company Limited 2005 

Demerara Tobacco Company Limited, a subsidiary of British American Tobacco, p.l.c., buys a branded product from a fellow subsidiary, pays more than US$600,000 in 'royalties' to the parent company, has one single distributor and no more than fourteen employees and pays another US$1,000,000 for management services from fellow subsidiaries and technical and advisory services from the ultimate parent company. The company also has an average of in excess of another US$1,000,000 due from a related party on which it receives no interest.

The company will be holding its 72nd Annual General Meeting this coming Thursday to announce that despite the floods which 'hampered distribution', the company has increased its profits before tax by some 6% on an increase in sales of 2% (on a 3.5% increase in volume).

Last May, after the high-visibility Minister of Health returned from one of his overseas trips he announced to the press that anti-tobacco legislation, like Tarzan, would be 'coming soon'. One year later, there is no legislation and the company that controls 97% of the market announces that its sales of cigarettes have increased by 18,000,000 sticks!

One year after announcing that his ministry would be conducting a survey biennially, the company can boast of the huge success with its after-work lime and music competition promising original music or an iPod - hardly the sort of thing that attracts non-youths. . . .

presenting an extremely attractive return to the group. The attempt by the company to justify a royalty payment of G$130M, by stating that the product is manufactured to 'predetermined specifications' is hardly convincing even to a non-smoker who can buy the same product almost anywhere outside of Guyana. And while every company can and should determine its business model, paying US$1M, for management services when all the company does is bring in a product and sell it immediately to a sole distributor seems to defy business logic. That Business Page has been sharply attacked by the company for raising some of these very issues in the past ought not to make them less worthy of repetition particularly in the absence of reasonable justification. Surely even Guyanese shareholders must be willing to put aside their appreciation of good dividends in the broader fiscal and national interest.

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