The Eastern Company for Tobacco provided Philip Morris International with options for the latter to pay its late dues worth $35m, which are a result of Philip Morris manufacturing some of its products in the Eastern Company’s local production lines.
According to an official in the Eastern Company, the two options compel Philip Morris to either buy tobacco from abroad for the benefit of the Eastern Company for Tobacco given the lack of foreign currency in the Egyptian market, or for the company to pay the dues in US dollar instalments before the end of 2016.
The official noted that the Eastern Company is arranging for a meeting with Philip Morris within two weeks in order to discuss the two options.
Philip Morris resorts to the Eastern Company in the production of its brands Marlboro, Kent, and L&M.
The official added that the Eastern Company has collected the dues in Egyptian pounds from Philip Morris in the last quarter of 2015, which is something that should not be repeated again due to the company’s urgent need for US dollars.
The company’s import costs are estimated at $30m a month. The strategic stock of raw materials has declined from being sufficient for 24 months to less than 12 months, according to the company’s statistics in September.
Osama Fouad, head of investor relations and head of the financial sector in the Eastern Company for Tobacco, expected on Thursday an increase of cigarette prices after the Egyptian pound’s flotation.
The Eastern Company has increased its production for the local market from 190 million cigarettes to 210 million cigarettes in an attempt to challenge the severe lack of cigarettes over the past months.
In a related context, the unaudited results of the company showed an increase of its profits by 16.3% during the first quarter of fiscal year (FY) 2016/2017 after achieving net profits worth EGP 427.3m compared to EGP 367.4m during the first quarter of FY 2015/2016.
The source explained that the growth in profits is mainly due to the increase of cigarette prices after imposing the value-added tax (VAT).
The Eastern Company had increased the prices of nine varieties of cigarettes, and four varieties of molasses in the local market by about EGP 2-3 following the application of the VAT over the past few months.
Total net profits of the Eastern Company after the VAT’s application reached EGP 1.4bn in FY 2015/2016, compared to EGP 1.3bn during FY 2014/2015, with an increase of 12% during the FY ending on 30 June 2015.