The Financial Year ended September 2004 was another successful year for our Bank. I am pleased to report that we recorded a 43.7% improvement in our profit from $373.3 million in 2003 to $536 million in 2004. The results bear testimony to the hard work of our Management and Staff in restructuring the operations of the Bank over the last five years. Based on this achievement, the Bank is poised to improve its performance and for greater expansion.
As a result of our good performance, your Board of Directors has approved a final dividend of $0.583 per stock unit which when added to the interim dividend of $0.167 per stock unit already paid brings the total dividend for the financial year to $0.750 per stock unit. This represents a payout of 41.96% of profit after tax, an increase of 200% over last year's payment which in dollar terms is the largest dividend payout ever made by the Bank.
ECONOMIC OVERVIEW
The economic advancement of our Country depends largely on a stable political atmosphere. It is in the interest of all concerned to realize that notwithstanding political differences the Country should appear to be attractive for investment. Overseas investors in particular need to have this confidence to encourage them to venture into development of our resources. With avenues for investment available elsewhere, every effort should be made by those concerned to make our Country competitive and eschew distractions.
Economic growth of 2.55% is projected for 2004, a significant turnaround from the negative GDP growth of 0.6% in 2003 and higher than the growth rates of 1.1% and 1.5% recorded in 2002 and 2001 respectively. The decline in GDP in 2003 was caused mainly by a 8.7% decline in sugar production because of adverse weather conditions and declines of 21% and 8% respectively in log and wood production.
Notwithstanding the foregoing, there was some growth in various sectors of the economy. Among them the rice sector, where production rose by 23% as a result of increased acreage under cultivation, increased yields and better prices. Also , poultry production expanded by 41% in response to increased tariffs instituted by the Government on imported chicken parts from the USA; and diamond production increased by 66% to 412,538 metric carats.
SUGAR
A major development is planned for sugar with the decision by the Government to proceed with the construction of a modern factory at Skeldon Estate. It is our understanding that the financing for the approximately US$100 million project is in place and the earthworks for the foundation of the factory have been completed. Construction of the factory is expected to commence shortly. It is pleasing to note that in anticipation of the increased demand, development of new cultivation areas commenced in 2003 and is proceeding as planned.
Given the recent announcements of proposed cuts in the preferential price by the EU (from current levels of 0.26 dollars per pound) by 20% in 2005 and 33% in 2007, it is imperative that this project continues to be vigorously pursued. Upon completion, it is anticipated that the cost of production of sugar at Skeldon will be reduced to approximately US$0.09 dollars per pound. There are also spin-off benefits for the neighbouring communities since the factory will be powered by a 30 megawatt cogeneration facility using bagasse, and the expected surplus electricity will be sold to the National Grid.
INFLATION
The inflation rate as advised by the Government was 5% in 2003 compared with 6% in 2002 with inflationary pressures in food, housing, transportation and communication all being contributory factors.
EXCHANGE RATE
The Guyana dollar depreciated against the US dollar by 2.4% during the first half of the year vis-à-vis 0.8% during the same period in 2003. Overall the foreign currency market performance was mixed with demand rising towards the end of the first quarter and weakening during the second quarter. The initial heavy demand for foreign currency was influenced by a combination of factors; specifically the rising oil prices, lower capital flows from Multilateral Donor Agencies and higher demand for US denominated investments.
PREMISES
Our Vreed-en-Hoop Branch was relocated to modern and attractive premises in September 2004. This new building has contributed to the enhancement of the area. We anticipate that, with the staff and customers in more comfortable surroundings, growth in the Branch's business will be forthcoming. Our demonstration of confidence in the future of West Demerara through this investment should encourage other potential entrepreneurs to invest.
CITY PROJECT
I take this opportunity to inform you of our commitment to rehabilitate and refurbish the Promenade Gardens to enable it to take its place as a worthy national heritage. Over three years a sum of $22M will be expended on this project.
FINANCIAL REVIEW
The Bank performed extremely well in fiscal 2004. We recorded a profit after tax of $536.4 million, representing earnings per share of $1.79. This earnings per share is a 44.4% improvement on our 2003 performance. Our return on assets was a respectable 0.97%, but still below international standards of 2%.
Provisions continue to be a significant charge against operating profits as our efforts at improving asset quality and balance sheet strengthening continue apace. For 2004, a sum of $768.2 million was allocated for provisions, compared with $730.2 million allocated last year. I am pleased to advise that fewer accounts are being relegated and the focus on recoveries continues to bear fruit.
FUTURE OUTLOOK
We remain confident of the future of the Bank and cautiously optimistic about the economic prospects for the long term. This cautious optimism is based on the continued drive to improve the Country's infrastructure; the promise to commence the construction of the Berbice bridge in December 2004; the opening up of the telecommunications sector; the growth in the construction sector; the success with debt cancellation; and the promised restructuring of the legal system.
Internally, we will continue to improve the Bank's capacity to play a catalytic role in the development of Guyana and we look forward to the relevant authorities creating the environment within which that can happen.
ACKNOWLEDGEMENTS
Our staff remain our most valuable resource. We continue our already intensive efforts at encouraging personal development, facilitating the furtherance of academic growth and achievements and training in-house, local and overseas including training at our parent Company - Republic Bank Limited. The need to increase our efforts in this regard has taken on greater urgency in the face of the ongoing high emigration of skilled people from Guyana and the impact that this is having at all levels.
I wish to commend and thank our Management and Staff for the commitment and diligence they have shown throughout the year.
I also thank my fellow Directors for their guidance and our customers and shareholders for their continued loyalty to the Bank.
Ashton Chase Chairman October 18, 2004