Excerpts from speech of Mr. R A Shah, Chairman of Godfrey Phillips India

For FY08, the domestic cigarette sales in value terms increased by 12% to Rs 1637 crore while exports increased by 94% to Rs 22.27 crore.

The company had launched new brands namely CLUV Spice- India's first clove based cigarette, Tipper Premium Filter and Cavanders Gold Leaf Filter in regular filter category in domestic market and a few others in the export markets.

For Q1 FY09, despite lower volumes, the domestic cigarette sales value was higher and stood at Rs 457 crore as against Rs 379 crore in the corresponding quarter last year.

In tea business, FY08 has seen a consistent double-digit growth in both volume and value of 20%, which is way ahead of the Industry levels. During the year under review, the domestic tea sales were higher at 4264 tonne valued at Rs 56.85 crore compared to 3560 tonne valued at Rs 47.46 crore in the previous year.

In cigar business, the sales for FY08 volumes grew by 113% and the sales turnover increased by 34% to Rs 4.42 crore. Phillies Flavoured Cigars continue to grow in demand and the volume increased by 27%. Hav-A-Tampa Vanilla and Black Gold also maintained a steady trend. Don Diego, Santa Damiana and Flor de Copan continues to gain popularity and the sales grew by 7%.

There was an unprecedented increase of 100% in the import duty on cigars for the year 2008-09. The company had to resort to increase in price on most of the cigar brands.

The value of turnover of cigar for Q1 FY09 was higher at Rs 0.85 crore as compared to Rs 0.71 crore in the corresponding quarter of the last year. The company continued to be the market leader with 68% market share.

Overall net sales of the company increased by 17% to Rs 902.93 crore and the net profit grew by 27% to Rs 112.22 crore during FY08.

The company’s tobacco and tobacco products exports increased by 48% to Rs 111.72 crore while tea export increased by 40% to Rs 5.72 crore for FY08.

The cigarette exports in terms of value were higher by 94%, the un-manufactured tobacco export was significantly higher by 78% as compared to that in the previous year.

The company has made its entry into the promising confectionery segment with the launch of ‘Funda Mint’ candy.

The company has declared a dividend of Rs 25 per equity share of Rs 10 each for the year 2007-08, same amount as last year. The management of the company on dividend issue said there was increase in excise duty on non-filter cigarette in last budget. The excise duty on non-filter cigarette has increased by 500% on cigarette of below 60 mm length and 250% on cigarette of 60 mm to 70 mm length. Moreover the company has very small market share of 12.5% compared to ITC and VST, which are very big players and together control 80% of market share. At present, the company is present in North India, Rajasthan and West India. As such, to cope up with the pressure from big rivals and for investment in geographical growth, line extension and introduction of new variants, the company was unable to increase the dividend or pay bonus shares to its shareholders.

The increase of excise duty on non-filter cigarettes less than 60 mm long has resulted in a price increase to Rs 13.50 (for a 10 cigarettes pack) from the earlier Rs 5 or less, due to 12.5% VAT introduced in the year 2007-08 and steep hike in excise duty in the last budget. As a result, it will be unviable for a legitimate cigarette manufacturer to market a product at the Rs 5 price band.

The company management has made an ambition plan of achieving Rs 1600 crore of domestic sales along with export reaching the same level.

The company will spend Rs 165 crore on sales promotion for FY09.