By Shanima A
(Reuters) - Polish and Czech drinkers will face bigger bills for vodka with Stock Spirits <STCK.L> planning to hike prices because of proposed increases in excise duties in its two biggest markets.
The Czech Republic proposed a 13% tax rise on spirits and gambling to boost the state budget revenue by 1.3 billion Czech crowns ($56 million) in 2020. Poland has proposed a 10% increase in taxes on alcohol from January 2020.
Stock Spirits relies on Poland and the Czech Republic, where the company sells the 1906, Stock Prestige and Vodka No.1 brands, for three quarters of its revenues.
The firm's profit for the year ended Sept. 30 more than doubled to 28.3 million euros ($31 million), with volume growing by 8%, driven by solid demand for its premium vodka brand.
Shares in the FTSE small cap firm, which focuses on central and eastern Europe, were up 6.2% at 200 pence at 1036 GMT.
But the 2020 excise duty increases in Poland and the Czech Republic should prove a formidable headwind, JP Morgan said. The brokerage cut its 2020-2021 earnings estimates by about 5%.
The company said it was confident of managing any impact.
"I would expect the change of price on the shelf to take place on the course of first quarter," Chief Executive Miroslaw Stachowicz told Reuters.
"To make it a smoother increase of pricing, we will extend the price increase over the period of time," Stachowicz said.
He said the main aim to avoid any fall in demand as a result of price rises, adding that price hikes in the premium alcohol and spirits market would be modest.
The company, with 45 brands including vodka, vodka-based flavoured liqueurs, rum, brandy, bitters and limoncello, is the second biggest vodka firm in Poland with a 27.4% market share.
In the Czech Republic, Stock Spirits is the top player in the spirits market with a 33.1% share.
The average Pole consumes 11.6 litres of alcohol per year, according to World Health Organization data https://data.worldbank.org/indicator/SH.ALC.PCAP.LI?locations=PL-CZ of per capita alcohol consumption, while Czech Republic comes in at 14.4 litres.
Stock Spirits said it would invest about 25 million euros to increase distillation capacity in Poland, as it is confident about the prospects of the business.
(Reporting by Shanima A and writing by Noor Zainab Hussain in Bengaluru, Editing by Rashmi Aich and Edmund Blair)