Carreras has ‘grave concerns’ over large shareholder NIF

Cigarette trader Carreras Limited is raising concern that new tobacco regulations could force the company’s second largest shareholder to offload its $2 billion stake.

The National Insurance Fund, NIF, the state-operated pension fund, holds 214.18 million shares in Carreras, which gives it 4.41 per cent ownership in the cigarette trader.

The bill in its present form speaks to the prohibition on investment in the tobacco industry by public entities and employees.

“We take issue with the unnecessary and disproportionate prohibition on investment in the tobacco industry,” said Carreras in its annual report released on Thursday. “This is of grave concern as one of Carreras’ longstanding investors is Jamaica’s NIF, which is the investment arm of Jamaica’s National Insurance Scheme. This will also impact thousands of shareholders who are employed by public bodies from investing and supplementing their income.”

Carreras consequently wants the draft bill for the Tobacco Control Act 2020 adjusted before it becomes law to allow public bodies to invest in the company.

The British-owned cigarette company, which has operated in Jamaica since 1962 and has traded on the Jamaica Stock Exchange since its founding in 1969, is currently valued at $45.48 billion on the market, while the stake held by the NIF is worth $2.01 billion as of Friday.

Over the years, Carreras has been one of the most reliable distributors of dividends, ranging between $3 billion and $4 billion per year. So far, for calendar 2022, the cigarette trader has declared dividends totalling $2.8 billion, over $126 million of which will flow to the NIF.

The company is ultimately majority owned by British American Tobacco Plc, through Rothmans Holdings Caricom Limited with 50.4 per cent interest valued at $23 billion.

The concern about public investment was one of nine raised by Carreras, most of which have been aired in the past, but which the company reasserted as threats to the growth of the business.

Carreras says it agrees with the regulations in principle but added that its present form creates “subjective interpretation,” it stated.

The company views the bill as containing “disproportionate and unconstitutional” elements that it said should be resisted in any “free and democratic society”.

The concerns include the limitations for the sale of tobacco products in public places, which it states threatens some 10,000 bars islandwide; the disruption of relationships with key business partners through the prohibition of incentives and discounts; a ban on sponsorship and corporate social responsibility initiatives; regulation of reduced risk products with tobacco such as e-cigarettes or vapes; autonomy of the minister of health to prescribe and regulate the industry; a more in depth reporting of the product ingredients which it thinks will reveal trade secrets; a ban on showing cigarettes in shops and stores which it thinks will make selling illicit cigarettes easier by hiding both labels; an increase in the size of the graphic health warnings from 60 per cent to 90 per cent on the product label; and a prohibition on investment in the tobacco industry by public entities and employees.

“Based on our concerns, we commenced advocating for the enactment of a balanced, fair, and practical Tobacco Control Act, whilst emphasising that we are not averse to regulations as we are fully compliant with the current Tobacco Control Regulations in force,” said Carreras.

Carreras said in the report that it continues to hope that its concerns will be considered as the bill moves towards passage by legislators.

“It is our hope that at the end of the democratic process, a balanced and comprehensive bill will be enacted, a bill which seeks to support the intent of the lawmakers while continuing to allow a balanced market environment for the legal industry, and one which continues to ensure that illicit and tax-evading activities are hindered,” the company said.

steven.jackson@gleanerjm.com