Imperial Tobacco New Zealand boosted annual profit by almost a third as cheaper raw materials and a smaller wage spend helped offset a rising excise duty bill that has more than doubled over the past decade.

The Lower Hutt-based local unit of UK tobacco giant Imperial Brands reported a net profit of $39.9 million in the year ended September 30, up from $30.5m a year earlier, financial statements lodged with the Companies Office show.

Revenue increased 1.5 per cent to $562.7m, lagging behind a 4.6 per cent rise in duty to $402.8m.

The government has been ratcheting up tobacco excise tax for much of the past decade in a drive to achieve an essentially smokefree country by 2025.


That's seen a 133 per cent increase in the duty paid by Imperial Tobacco NZ from a decade ago, with its excise bill just $173m in 2007.

Tobacco excise totalled $1.68 billion in the year ended June 30, 2017, amounting to 2.7 per cent of the Crown's tax take. In 2008, some $963m of tobacco excise represented 1.7 per cent of the total tax take.

In a submission to Parliament's foreign affairs, trade and defence committee on the Customs and Excise Bill in February last year, Imperial Tobacco NZ lobbied for an exemption on excise exclusions for personal use to be dropped, saying that would "make detection and enforcement a lot easier as all tobacco ready for smoking needs to have come from a licenced manufacturer".

The maker of cigarette and tobacco brands including Horizon, JPS, Peter Stuyvesant, West and Drum said the size of the black market in roll-your-own tobacco had probably increased from the 8 per cent share estimated in 2010 and questioned officials' view that it wasn't a major problem "given the amount of revenue forgone and the undermining of a number of government policy objectives".

Imperial Tobacco NZ lifted its annual earnings by trimming 12 per cent from employee costs to $20.7m and cutting 19 per cent from raw materials and consumables used to $50.2m.

It also registered a $14.2m gain from changes in inventory, up from $3.7m a year earlier. Its tax bill rose to $15.6m for the year from $12m in 2016.

The local unit paid a dividend of $30.5m to its parent, down from $31m a year earlier.

Imperial Tobacco NZ invested $50m upgrading its Petone factory to supply the Australian market, exporting about 90 per cent of its locally manufactured items with the remainder sold domestically.


Related party stock sales fell to $78.5m in the year ended September 30 from $92.6m in 2016, while stock purchases from other Imperial units dropped to $10m from $17m.

Local representatives didn't immediately respond to BusinessDesk inquiries.