Karelia Tobacco: Increase in profits and market share in 2021 – Challenges for 2022 and a colossal dividend

With a sharp increase in profits and the intention to distribute a mammoth dividend, 2021 was a year of remarkable economic performance for the Karelia tobacco industry.

During last year’s financial year, based on the financial results published yesterday, the historic tobacco industry of Kalamata, managed to increase its sales volume by 8.5% to 228.237 million euros (excluding VAT and excise tax), of which 75.9% came from abroad.

Its net profitability, aided by significant exchange rate differences due to the sharp appreciation of the US dollar against the euro during the year, jumped by 60.4% to 86.676 million euros, while operating profit before taxes , interest, exchange rate differences and depreciation amounted to 106.973 million euros, an increase of 16.65% compared to 2020.

Increase of Greek market share

In the Greek market, the sales volume increased by 6.6% in cigarettes and a marginal increase in tobacco for hand-rolled cigarettes, while Karelia’s market shares amounted to 19.34% (2020: 18.24%) and 27.24% (2020: 26.97%) respectively.

At the same time, in the country’s Duty Free Shops, the easing of travel restrictions in recent months has been able to reverse the sales lag that occurred in the first months of 2021, resulting in an increase in turnover from this area, by 42 %.

Mammoth dividend

Taking into account the results of the year 2021, the financial situation of the company, the prospects, as well as the data of the wider financial environment, the BoD. will propose at the next Ordinary General Meeting of shareholders, which will be convened on June 8, 2022, the distribution of a dividend of a total amount of 30,360 thousand euros corresponding to a gross dividend of 11 euros per share.

According to the company, the proposed dividend is higher than that of the year 2020, with the dividend yield being 3.95% based on the stock market price on December 31, 2021.

Price increases are coming

Regarding future developments, the company stated that it is “monitoring the developments both politically and economically and takes the necessary measures to reduce the effects of the adverse conditions created by the pandemic in recent years, but also by the intense inflationary pressures. As a result of supply chain problems, supply constraints in critical sectors of the economy, rising oil, gas, by-products and electricity prices, and the Russia-Ukraine conflict.”

At the discretion of Management, the increased costs lead to increases of the factory prices where possible, while there is talk of a reduction of the gross profit margin by 10 to 20% or even greater.

As it is characteristically pointed out: “Already in the last months of 2021, we have been faced with significant increases in raw materials and auxiliary materials, energy costs and transport costs, while in some sectors this trend is expected to strengthen further in the second quarter of the year. At this stage and in the light of the conditions we are called upon to cope with, we consider it necessary to ensure the adequacy of raw and auxiliary materials and less the search for questionable effectiveness of alternatives at a lower cost. At the same time, and where this is possible and without jeopardizing our competitiveness, we proceed to increases of our factory prices in order to cover part of the above price increases. We are convinced, however, that from the second quarter of 2022 onwards we expect a reduction of our gross margin by about 10-20%, while in case the US dollar slips against the euro, the reduction in gross profitability will be greater. ” .