“Our Country, Our Life, Our Beer”
My fellow shareholders, it is my privilege and pleasure to welcome you to our Company’s Fifty-fourth Annual General Meeting, and to present on behalf of the Board of Directors, the Annual Report for the period ended 30th September 2009. I will also utilise this opportunity to extend best wishes and sincere greetings for 2010 to all of you and your families from all of us within the Company.
My fellow shareholders, there was so much hype and expectation at the turn of the century that the year 2000 would have heralded much needed political, economic and social change across the world. There was that expectation that maybe somehow, peace and a better quality of life for humankind would have been encouraged and established. A decade later this would appear not to be the case or to be on any agenda designed to promote a better world. One gets the impression that a global consensus on any issue be it climate change, nuclear disarmament, economic and social disparity between the developed and the under-developed nations of the world to name just a few, will be difficult to arrive at. There appears to be an unwillingness to rise above the insularity which arises when national needs are placed before the global common good. There is the growing perception that all is not well in the world as signs around us indicate that both globally and at home, there is continuing social and political upheaval as is evidenced by the scope and nature of the inhumanity which is visited upon individuals and sections of not only our society but elsewhere as well. Where has the “Peace and Goodwill towards men” echoed a mere few weeks ago, gone?
My fellow shareholders, we come together at this time to consider and reflect on our Company’s performance over the past year and to consider what the future has in store for us and our Company. We contemplate our hopes, our aspirations, the things we need to do and to become if we are to rise above the ordinary and to maintain that required financial and collective stability to enable our Company to continue its role of being a good corporate citizen and a secure place for our shareholders, our employees and all who have come to consider us as partners on their journey of life. As we come together each year for our Annual Meetings, we do so within the expectations we all have that within the new year ahead of us, we will be able to rise above the ordinary and seize the opportunities which will be presented to us, to reverse the negativity and sweep away the darkness which threatens to engulf us. This will require the involvement and participation of all of us if we are to be successful. Perhaps the words of our National Poet, Martin Carter, say it best of all; “All are involved, all are consumed”. And consumed we will be, my fellow shareholders, if we continue to fail to be attentive to the changes which are taking place around us. We no longer live in the world in which our grandparents lived a mere century ago. Much has happened and much has changed since those uncomplicated days or so it seemed at that time. Technology and the Internet have come together to create a new world and a new set of imperatives. A recent Sixty Minutes Documentary aired on the CBS Network on l8th November 2009 reported that “Cyber crime” has infiltrated just about every aspect of modern life and living. It poses a serious threat to the financial stability of the world’s banking and financial systems and has been used to compromise the Power Grids in various countries thereby affecting every sector of society. Brazil which is just next door to us had to address the disruption to its power supply when hackers broke into the national grid and disrupted the power supply to three major cities.
My fellow shareholders, we are not isolated from all that affects every other nation and society in the world for we are a part of this global village. We may well ask what has the global recession, a double digit unemployment figure in the USA, wars in Afghanistan and Iraq, rising tensions in some countries on the African continent, a lack of confidence and uncertainty on the part of investors resulting in instability in the world’s trading markets – what has all this to do with us? A whole lot and much more! We do not live in glorious isolation, immune from all that affects everyone else and it’s not an option to use another’s lack of success to justify any failure on our part. Even though we may get some type of questionable satisfaction from such an exercise, ours continues to be the responsibility to ensure that our Company remains financially secure and stable for the benefit of our shareholders and investors and the job security of our employees. In this there should be no difference in opinion or point of view. We will do all that it takes which is legally and morally acceptable to ensure the survival of our Company.
During the financial year 2008-2009, our motivation and inspiration came from our theme “Building on traditions of Strength”. It was necessary, in spite of the difficulties encountered with slow economic growth and un-employment resulting in reduced spending power, to continue with the programme to upgrade the Company’s Plant and Machinery to make our manufacturing operations more efficient. The following projects were completed during the period under review.
• The main components on the Uncaser and the Filler were upgraded for increased capacity.
• Major overhauls were completed on the Pasteurizer and Labeller.
The Lauter Tun upgrade was completed. This has resulted in improvements in the extraction process and savings in raw materials used in the brewing process.
Tropical Mist Plant
A new 5 gallon Bottling Machine, capable of producing 300 bottles per hour, was installed and commissioned.
The No. 2 800 HP Boiler was re-tubed resulting in savings in Diesel consumption for the year.
From the inception, in 1955 when our Company was established as a modern manufacturing facility at that time, our strength has been in our ability to manufacture and to be productive. It was only during the decade of the 80s when circumstances totally out of our control, conspired to take our independence from us that we faltered in our mission. Since then as conditions improved, our aim has been to improve and to upgrade our Plant and Equipment. This exercise continues.
Fellow shareholders permit me on your behalf to extend our sincere thanks and congratulations to Gavin Todd and the staff of the Engineering Services Department, Mr Shabir Hussein and the staff of the Buildings & Transport Department and the Power Generation Department for achieving these goals.
REVENUE & RESULTS
The Group’s third party revenue increased from $15.187 billion to $15.994 billion, an increase of $807.0 million or 5.3%.
The Profit before tax for the Group was $2.345 billion compared to $1.968 billion in 2008, an increase of $377.0 million or 19.2%.
The Profit after Tax for the Group attributable to shareholders was $1.285 billion reflecting a 23.3% increase or $243.0 million on the results of 2008.
Citizens Bank Guyana Inc., a 51% owned subsidiary of the Company, achieved $390.8 million after tax profit compared to $437.7 million achieved in 2008.
Banks DIH’s Gross Revenue and Services for the year ended 30th September 2009 were $14.226 billion compared to $13.565 billion in 2008. This reflects an increase of $661 million or 4.9% and profit generated before taxation of $1,838 billion, an increase of 29.4% with an increase in Corporation Taxes of $147.4 million or 25.9%. Net profit after taxes and before dividends amounted to $1.121 billion. Adding Citizens Banks contribution of Net Profit to the Group’s results, the Group’s Net profit increased by $244 million to $1.285 billion. This net profit reflects an increase of 23.3% over the previous year.
The increase in Revenue came primarily from the increases in the sale of PET Soft Drinks, Ice Cream, Rum Wine and Tropical Mist products. The introduction of Power Stout in April 2009 and significant growth in the Export Division which was possible through an increase in demand for Banko Wine and Rum, and the launch of Power Wine in the Jamaican market in July 2009. Altogether case sales increased by 363,820 cases from 5,935,841 in 2008 to 6,299,661 in 2009 or 6.1%.
Sales and Services net of Consumption/Excise taxes amounted to $12.557 billion against $11.628 billion in 2008, reflecting an increase of $929 or 7.9%.
Export sales were $288.8 million or $US$1.4 million. In 2008, sales were $187.6 million or US$910,789, an increase of $101.2 million or 54%. Export sales realised a profit of $14.1 million in 2009 as against $7.0 million in 2008. Power Wine, a new product launched on the Export Market during the fourth quarter of financial year 2009, in July, had sales amounting to 16,385 cases or $55.7 million.
My fellow shareholders, it is with some measure of pride that I can report on the recognition which has been given to our Rum products in the United Kingdom and Europe. As a result of the efforts of our Blending, Production, Sales and Marketing Departments, we have been able to secure representation and agencies for our Rums which have won international recognition and awards in England. At the recently held Spirit Business Rum Masters Awards 2009 in the U.K, VXO Rum secured a Master Award in the Gold under Seven Years category while the XM Royal 10 Year old was awarded a master in the Gold 8-12 Years old class. We have also been able to penetrate the markets of the United Kingdom, Italy, Spain, France and efforts are entrain to secure agencies in other EU countries.
Fellow shareholders, the achievement of these sales was no easy task and we must offer congratulations to our Operations Director, Mike Pereira and staff, Mr Robert Sugdeo, Rum Blending Executive and staff and our Sales Director, Mr George McDonald and staff.
The increase in overall profitability was due to reductions in –
Bunker ‘C’ Fuel
We also had increased expenses which affected the profits of the Company.
Repairs & Maintenance
Write off of Durables & Consumables
The increased depreciation of write-off of Durables is in relation to the Company’s vision for the future in the Soft Drinks, Brewery and Energy sectors. Management is now monitoring the capital base of the Company as part of its effort to manage expenditure, so the efficiencies and longevity of its assets is now receiving greater attention from the engineering department.
As a result in the year you will note that there was a write down of some assets and an adjustment of the expected useful lives of others. This flows with requirements for continuing improvements for the standards of production of some of our principal products.
FINANCIAL UP DATE
My fellow shareholders, at the prior year end, it was reported that the Company was awaiting confirmation from the Guyana Revenue Authority of the appropriate basis for determining chargeable value on which excise tax is to be determined. Since January 2007 the Company had based its excise tax payments on the selling prices for alcoholic beverages reduced for estimated selling expenses. It however fully provided for the additional excise tax that would have arisen had the selling prices for alcoholic beverages not been reduced as described. During the current year, the Guyana Revenue Authority agreed with the Company’s approach to excise tax determination and the provision was reversed to income. The settling of the Excise Tax could not have been finalised at a more appropriate time.
In 2009, the Group’s spending on capital works amounted to $878.0 million, which mainly comprises the following:
1) Beer Plant Uncaser
2) Eight Sales Trucks
3) Opening of OMG
4) Expansion of Citizens Bank Branches at Bartica and Thirst Park
5) Bottles & Crates
6) Property – Industrial Site Roof
7) Power Generation Department – Fence & Security System
8) Bottle Shed at Houston Bond
The capital spending authorised for 2010 is $1.272 billion, of which $684.0 million is Contracted for. The major expenditure will be –
Commercial Fleet $103.7 m
Waste Water Treatment Plant $100.0 m
Beer Plant Bottle Washer $443.1 m
Empty Bottle Inspector $113.1 m
Malt Loading Transport System $ 80.0 m
Complete Brewhouse Automation $ 41.0 m
Low Pressure Air Compressor $ 30.0 m
I-Series Main Computer System $ 32.0 m
The Board of Directors declared a first interim dividend of $0.12 per share, which was paid on 8th May 2009, a second interim dividend of $0.12 per share, which was paid on 19th October 2009, and now recommends a final dividend of $0.21 per share payable on 25th January 2010. The total dividend for the year is $0.45 per share with the overall cost being $450.0 million.
The Balance Sheet of the Company shows a strong working capital with a substantially improved cash position. The working capital was $4.3 billion. Current assets increased by $448 million. The Company’s cash resources at the Bank were $1,785 billion compared to $1,305 billion in 2008, an increase of $480 million.
CAPITAL & RESERVES
The equity of the Group was $16,140 billion. The issued share capital of 1.0 billion shares shows a net asset per share of $16.14 which gives the minimum price at which a Banks DIH share should be traded.
EARNINGS PER SHARE
Earnings per share increased from $1.04 per share to $1.29 per share.
The sum of $1,285 billion has been transferred as profit retained resulting in the reserves at the end of the year amounting to $13.7 billion.
Revaluation of the Company’s Property, Plant and Equipment was completed in 2009 in accordance with IAS 16, and the surplus of $796,836 million (net of Tax) arising on the revaluation of Freehold Properties was transferred to the Reserves. Messrs Rodrigues & Cox was the Valuator of the Freehold Properties.
THE ENVIRONMENT: WASTE WATER TREATMENT FACILITY
My fellow shareholders, as you are well aware, there is mounting concern about the longevity and sustainability of life on our planet if immediate changes to our lifestyles and attitudes are not implemented. Our country and our Company are not exempt from being involved in the process to promote activities which encourage and support conservation and change. As you are aware, we have been a Bottling Partner of the Coca Cola Company for many years and this has been a mutually rewarding experience. As a part of this continuing relationship, the Coca Cola Company requires each Bottler of Coca Cola products, to put measures in place to ensure that our activities do not compromise the environment in any way. In the satisfying of this requirement, we have committed to the installation of a Waste Water Treatment Plant to ensure that any discharges from the production process into the rivers and streams are environmentally acceptable, and conform to required standards. This is a non-negotiable requirement which must be in place by the end of 2010 and will require a Capital spend of $200.0 million. A Memorandum of Understanding has been signed with the Coca Cola Company and discussions are “entrain” with potential suppliers of Plant and Equipment. At the local level, we are in the process of complying with the EPA and other Government agencies requirements to secure approval for this project to proceed.
Additionally my fellow shareholders, during the period under review, the Company successfully concluded the following Audits which were audited by external Auditors -
• Diageo Quality Audit
• The Coca Cola Suppliers Guiding Principles
The Soft Drink Plant successfully concluded the HACCP Maintenance Audit for 2009 achieving an overall score of 98.7% as against 98.4% in 2008.
Our Coca Cola Quality Measure Reports averaged 91% over the twelve-month reporting period for Product Quality. We have been advised by Coca Cola that the TCCQS Quality Management System has been replaced by the ISO Certification for Quality, Safety, Environment and Food Safety.
CITIZENS BANK GUYANA INC.
Results of Operations/Performance of the Bank
Citizens Bank’s profit for the year was affected by an impairment provision of $170.2 million comprising $155.9 million for our deposits with the Stanford International Bank and $14.2 million for our investments with CLICO Trinidad Limited. These impairments were determined in accordance with IAS 39 and represent a 100.0% impairment of our deposits with Stanford Investment Bank.
Based on the guarantee issued by the Government of Trinidad and Tobago, the Bank expects full recovery of its capital sum of $100.0 million investment in CLICO Trinidad Limited. However, an impairment provision is required under the provisions of IAS 39 since repayment of the sum which matured on May 7, 2009 has been deferred to May 7, 2011 and the rate of interest reduced to 2.0% from 7.0%.
Total interest earned and collected on our Stanford deposits amounted to US$62,033.00 (G$12,685,804.00) while US$61,146.00 (G$12,504,444.00) was earned on our CLICO investment.
The Bank’s earnings per share increased to $7.36 from $4.43 in 2008.
Loans and Advances
Net loans and advances increased by 11.3% during 2009 to $10.4 billion from $9.4 billion. Our portfolio remains well diversified with minimal sectorial changes in exposure compared to 2008.
Customers’ Deposits in 2009 were $17.9 billion, an increase of $1.4 billion over the previous year.
In 2008, shareholders benefitted from a dividend of $1.20 per share. The bank paid an interim dividend of $0.50 per share in April 2009. The shareholders at the Annual Shareholders Meeting held on January 19, 2010 approved a final dividend of $0.70 per share bringing the total dividend payment to $1.20 per share for a total payout of $71.4 million.
Our initiatives continue to be geared towards strengthening our existing relationships with customers, developing new customer portfolios, and the implementation of new and creative products and services.
My fellow Shareholders, as a part of the stated growth initiatives, in 2010 the Bank proposes to establish a Branch in the town of Linden to facilitate better access to Banking Services for Account Holders and the Business Community. Work on the establishment of our Corporate Headquarters will proceed in 2010. Discussions are currently en-train with the Architects and Consultants to determine space utilisation to create the most appropriate work environment within that new facility. Consequent upon the completion of this exercise, the project will be put out to Tender.
My fellow Shareholders, I will utilise this opportunity to highlight the efforts and success achieved by Citizens Bank, in the area of Low Income Mortgages. Consequent upon the recent expansion of the ceiling from $3 million to $8 million, the Bank is offering to eligible clients, low income mortgages based on a total household income of $70,000 which will attract the very competitive interest rates of 4.95% and for the ceiling limit of $8.0 million, the rate will be 6.95%. This service will be further explained by teams of officers from the Bank who will be visiting the various communities over the coming months.
My fellow shareholders, in August of 2009, we completed the conversion of the Sheriff Street Qik Serv Restaurant which is now re-branded “OMG!”. This facility now incorporates under one management the Ultimate Catering, Arawak Steak House, Sheriff Qik Serv and a Tropical Mist Refilling Station. Over the period, we experienced some teething problems which are consistent with the opening and re-branding of such ventures. Most of these issues have been addressed and we look forward to being able to provide a quality food and beverage service to cater for the discerning tastes of our customers. The OMG! facility can be seen as our first step in the consolidation and optimising of the physical and human assets of our Restaurants. We have commenced discussions on the way forward to best utilise the now vacant No. 1 Bar and Arawak Steak House. It is expected that within this year, this matter would have been addressed as it is premised on a sustainable and vibrant economy.
2010 AND BEYOND
My fellow Shareholders, we completed the last financial year in ways which were similar to that of the previous year. An unfriendly global economic environment continued to negatively impact just about every aspect of life and living. The economic downturn and high unemployment in the United States and other population centres, restricted remittances which in turn affected the spending power of families which have come to depend on these cash injections to make ends meet. These restrictions when added to the minimum increase in economic activity in the country and a general malaise which appears to have taken hold of just about every aspect of life and living in the nation, it would be perhaps justifiable if we went with the flow and become swallowed up by the encircling negativity. My fellow Shareholders, this is not the way in which we do things in our Company. We do not give in and we certainly do not give up.
Last financial year, we were motivated by the thinking which was behind the theme “Buildings on Traditions of Strength”. These traditions, we acknowledged give the strength to the foundation upon which our Company is built, which permits us to maintain our competitive edge. Our history and culture reminds us where we came from and the core values which bonded us and kept the structure intact. It would perhaps be helpful for us to maintain the momentum of the past year, to reflect on what gives meaning and substance to everything which we do each and every day. Perhaps some of us present here this afternoon will remember an expression from our colonial past, “The Sun never sets on the British Empire”. So vast was this entity called the British Empire, that it literally was spread across the globe and in which ever place the sun rose, it rose over some colonial territory or outpost. The most easily recognised symbol of that British Empire was the Union Jack which stood as an emblem of might, power and strength. Since independence and our severing ties with our colonial past, we have replaced the symbol of that colonial might with an equally impressive and patriotic symbol, the Golden Arrowhead which hopefully speaks to us in similar ways.
It certainly is no secret that from the dawn of recorded history, humans have searched for different ways of leaving a record of their presence through the creation of symbols. These symbols have served to inspire, to motivate, to stimulate us when we have been laid low by the changing fortunes of time. Regardless of what or how we may think of our national flag, at any particular point, it continues to be the pre-eminent symbol of all that we hope for and aspire to as a people. Within our nation there are many symbols which represent the soul and heart of our people. Some were acquired with independence while others pre-date nationhood. These symbols have served to instil pride, a sense of ownership and to give identity to everything which is Guyana and Guyanese. The year 1955 recorded the creation of one such symbol, the establishment of Bank Breweries Ltd, the home of Banks Beer. Over the past fifty-seven years since the establishment of Bank Breweries Ltd and its evolution into Banks DIH Limited, the symbol of Banks Beer continues to be a representation of what our country and our life as a people can be. The iconic nature of the symbol evokes images and sentiments of national pride, industry, commitment and hard work. It continues to represent what the selfless pursuit of a vision and the required dedication and involvement can achieve.
My fellow Shareholders as was previously mentioned, whatever success we achieve over the year which lies ahead of us, will be as a result of the grace of God and our own efforts. There is little on the horizon which appears to be helpful and encouraging. We will continue to stress the importance of the manufacture of quality products and the creation of methods and strategies to market and sell with the aim of optimising profits. We will welcome any and all opportunities to increase our sales volumes, but what I believe will be necessary for our survival as a Company, will be the attitude we adopt towards cost savings within our Company. It is so easy to become complacent and laid back and to accept excuses for failures and a poor performance. We will have my fellow Shareholders over this year ahead of us, to focus on the reduction and elimination of waste in every facet of our Company’s operations. Within the broader understanding of what pride and ownership means, the pride we should have in our Company and our sense of ownership moves beyond just being a Shareholder or an Employee. We have to consider in everything we do and say within the Company that we are making decisions concerning something which belongs to me. Within our Production Plants, the optimum use of raw and packaging materials assumes an even greater importance. We all have to be conscious of the importance of cost in the production of any item. We are in the business of making a profit. If we manufacture anything at a loss, then we’re not in business, we’re in trouble, serious trouble.
Our vision and plans for the future also include the strengthening of the production capacity of the Winery and Rum Factory. It was certainly not intended to be a well kept secret, the fact that our rums have been well received into Europe and the United Kingdom, and have won Gold Medals at recent Wine and Spirits Competitions. Repeat orders stand as testimony to this acceptance. Our Banko Wine continues to prove just how its quality and adaptability has made it acceptable in several markets within Caricom. An enhanced Banko Wine, marketed as Hard Wine in Jamaica has been well received while enquiries from other markets continue to be actioned. My fellow Shareholders, our continued security and well being as a Company, lies in our capacity and ability to produce, to market and to sell quality products. The two essential requirements in achieving that goal are commitment on the part of our employees and the required efficiency at the level of our Plant and machinery. The recent successes achieved by our Wines and Spirits, Soft Drinks and Malt products are indicative of what’s possible if we all were of one mind and heart working together in the pursuit of one goal – success and recognition for our Company.
My fellow Shareholders, our Annual General Meetings in recent memory, have been held in an atmosphere of global economic uncertainty, a growing malaise and indecisiveness at the national level and a worrying lack of trust and accountability at the individual level. There is little which is uplifting and encouraging to motivate and to stimulate to strive for greater successes. We have to be careful as a Company, not to allow this creeping negativity to become entrenched in our Company. There is no place for negative forms of behaviour and attitudes. The theme which has been selected for financial year 2009-2010 is “Our Country, Our Life, Our Beer”. There is a compelling sense of ownership, belonging and identity which this theme illustrates. And that’s the reason fellow employees why it graces the cover of our Annual Report, is featured visibly on the vehicles of the sales fleet and will be our focal symbol within the Company over the coming year. And why should this be so? Banks DIH Limited and its flagship product “Banks Beer’, has been a part of what we are as a nation and a people for the past fifty-seven years. In fact it will not be an exaggeration to claim that our Company has been a part of the fabric of Guyana going back to colonial times. This legacy is something of which we can be justifiably proud. It helps us to understand and to appreciate what we are and where we have come from. It gives us identity and a sense of belonging. Feelings of insecurity and a sense of a lack of permanence usually result in a lack of direction and indecisiveness. This my fellow Shareholders we can ill afford at any time and especially now. Collectively as a Company and individually, we have a responsibility and an obligation to do and say all this is necessary, to keep the product “Banks Beer” and its image and by extension our Company as current and living symbols of all that is good about our country. This may seem to some as a sign of arrogance but by our behaviour, our attitudes, our commitment we can convince others to consider our Company and its flagship Beer as their own and closely intertwined within their lives. Our Country, Our Life, Our Beer thereby moves from being just another symbolic statement to being a fact. My fellow Shareholders, we must become passionate about our Company in the same way we are encouraged to be passionate about our citizenship and the symbols of nationhood. When others sense in you a lukewarm indifference concerning your emotional and physical attachment to both our country and our Company, then they in turn will respond likewise. This is one way in which indifference and complacency make their way into our Company and overtime eat away at the fabric of the Company. “Our Country, Our Life, Our Beer”, should be a rallying cry of patriotic fervour, of ownership, of belonging throughout the year ahead of us.
My fellow Shareholders, permit me to extend on my own behalf and on behalf of the Board of Directors, to you, your families and loved ones, a Healthy, Productive and Rewarding 2010.