A release from Guardian Group:
Insider call | Guardian Holdings is an IC Insider Buy Rated stock and is traded on the Trinidad & Tobago Stock Exchange
Related posts | Guardian ongoing profits up 29%
Archives for August 2013
LASCO Manufacturing profits in the future
August 2, 2013 by
In the aftermath of the first quarter results to June, investor’s would be forgiven if they were disappointed in the results of what many see as the flag ship of the three Lasco companies listed on the junior market. Revenues grew “oh so slightly” to $842.7 million from $835.4M in 2012. However, the company was able to maintain and control its costs of sales, thus achieving gross profit of $250.3 million slightly above that of the first quarter of 2012. Profit was not as fortunate as it slipped to $138.751 million from $153.54 million in 2012. The stock which was trading at $1.80 pulled back on the release of the results and closed at $1.45 on Wednesday.
Operating expenses | The first quarter operating expenses increased due to an under-accrual for a promotional expense during the last quarter of 2012-2013, which was brought to account in the current quarter. In addition, the company had to honour a retroactive duty charged by customs on the disposal of damaged raw material, which consequently impacted on the profitability for the period. But investors should be looking well beyond the latest results and focus instead on the major expansion that is currently under way. Once completed, the increased sales from new products will not only boost sales but profits and ultimately the stock price.
Not to be underestimated is the impact that the factory expansion is having on costs and the diversion of cash to fund the factory expansion that would otherwise have been available for investments.
Exports | LASCO Manufacturing exports 10% of sales as finished products to the United States, Canada, England, Panama and the Caribbean. The company is currently exploring West Africa, and Ghana in particular, as a new market. Exports are planned to move to 25% within a short time period. That will take some doing as local sales is also expected to grow. Current export sales would be need to increase by one and a half times to meet this target.
The chairman, Lascelles Chin, told the attendees at a press conference on Monday that “the development of a new product range has become an important facet in our strategic plan and every effort is being made by the team to ensure the margins required are obtained.
The chairman also disclosed that the factory expansion will cost just under US$30 million, this well be over the original planned figure of US$10-15 million. The factory is expected to be operational by September, at which time the company expects to roll out new products that will be priced very aggressively to compete with others in the market place. According to Chin, “The results of the manufacturing expansion currently underway at the White Marl location will undoubtedly unlock potential in the company for our consumers, shareholders and other stakeholders”. He indicated that this will be the largest factory in Jamaica at 340,000 square feet and will produce many new products to add to the current range.
The expansion is not only about new products. A significant factor will be the reduction of current costs and the ease of production. The new factory and machinery will result in waste reduction and eliminate the doubling-handling of goods.
The chairman reiterated, “With the expansion project near completion within the next two months, we expect that LASCO Manufacturing’s financial performance will improve significantly. Over the next year – many new products will be pivotal to the company’s growth and we look forward to being able to make further positive announcements about new products to you in the near future.”
Balance Sheet | Trade payables increased from $258.8 million at the end of 2012-2013 financial year to $333.8 million in June 2013 due to increased purchases of raw materials, which is typical for the period in anticipation of the summer, back to school and hurricane season. This was affected also by the exchange rate fluctuations during the first 3 months of the financial year. The receivable surge was due to extended credit terms offered to a major distributor. The company borrowed $1 billion to help fund the expansion of the factory with about $1 billion being internally generated funds. The loan represents just under 2 years of cash flow at present revenues.
Insider call | LASCO Manufacturing is a IC Insider Buy Rated stock.
Related posts | All 3 Lasco companies approve splits | LASCO Manufacturing: one for the radar
Higher cost flattens Paramount’s profit
August 2, 2013 by
Direct expenses rose 7.55 percent for the year to May but sales only increased 4.7 percent to reach $642 million highlighted by a 14 percent increase in administrative, sales and distribution cost. Staff cost rose by 18 percent to $50.5 million, plus an $11 million devaluation loss only made matters worse.
In the end, while Paramount Trading showed an improvement in net profit for the year, it was a reduction in tax payable of $10 million versus $30.75 million in 2012 and gains from acquisition of a subsidiary amounting to $21 million that helped pushed profits for the year above that of 2012, as pre-tax profit hit $83.5 million and after tax $73.3 million compared to pre-tax profit of $84 million in 2012 and $53.4 million after tax.
Problems | Concerns arise about amount due from debtors which rose sharply even as revenues have not. While amounts due up to 60 days accounts for the bulk of the increase or $28 million, amounts more than 90 days is up at $15 million, up from $5.5 million in 2012. Amounts owing for 31 to 60 days is up to $37.7 million, an increase of $11 million. Provision against the debts amount to only $6 million. The company seems exposed to potential doubtful debt problems with what appears to be a tighter economy. The increase is also robbing the company of cash that could be used to pay down expensive borrowings.
While sales grew by less than 5 percent, segment results show an interesting picture with chemicals sales growing 9 percent but gross profit declining from 32 percent to 29 percent. Construction and adhesives sales fell by 22 percent but the margin increased from 36 percent to 52 percent and the manufacturing margin improved from 38 percent to 43 percent as sales fell by 19 percent. Overall margins increased from 41 percent in the first nine months of the year to the 44 percent by the end of the financial year 2013, but it’s down from 48 percent for 2012. The margin for February was just 36.6 percent, which helped to drag down the margin for the year. Margin for the final quarter results was restored to 48 percent.
Forecast | Earnings per share for 2013 amounted to 54 cents for the year based on the average number of shares in issue for the year. In December last year the public purchased 30.85 million shares bringing the total to 154.247 million units.
IC Insider’s forecast for the current year is for earnings per share of 74 cents and 88 cents for 2015 fiscal year. The forecast is based on a restoration of profit margin, removal of taxation on profits and reduction in interest cost as loans are reduced.
Balance sheet | Receivables have climbed to $146 million from $99 million in 2012, inventories fell to $172.5 million from $186 million. Receivables represent nearly 3 months of sales and inventories and 5 months of cost of sales, both these items appear to be out of line and is costly. Cash helped by the proceeds from the public share issue is up to $60 million after repaying $39 million of loans. Current assets exceeds current liabilities by more than 2.6 to 1 and borrowings have decrease to $71 million from $110 million. Equity climbed to $273 million helped by the inflow of new capital last year and profit for the year to May.
Stock Outlook | The stock which last traded at $3.30 is recommended as a cautious buy at this stage.
Fiscal deficit target exceeded again
August 1, 2013 by
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A $1.5 cut in interest payment, a $2 billion reduction in capital spend and $1 billion saved on programs was more than enough to wipe out a reduction in revenues of $2.4 billion due to a number of factors in June this year.
Some $440 million in the revenue shortfall came from increased payment of withholding tax refunds on interest. Tax on dividends may have been over estimated on the assumption that the payment pattern would have remained. Instead many companies brought forth payments to March thus beating the taxation for a part of the annual payment.
Telephone tax was way down no doubt a result of lower calling rates. Overall international trade delivered as planned but a few fell somewhat short. Local GCT was 15 percent up or around $500 million over forecast and was up 6 percent above the amount collected in June last year, while SCT fell short by $700 million against 2013/4 budget but this may be due to a shift between May and June as the May target was over achieved and may have shifted some of the inflows to that month which enjoyed $900 million more inflows than planned. Company profit tax fell $500 million short of plan.
Due to the savings on the expenditure side and overachievement in the first two months, the fiscal deficit to date is running well ahead of plan by $4.8 billion, resulting in the deficit coming in at $5.4 billion. The deficit for May was just $1.63 billion against projection of $3.7 billion. The target for July is for a deficit of $1.7 billion, but August is a huge $10.8 billion.
Compared to 2012 revenues, this year is running well ahead of the quarter to June last year by 13.5 percent and 16.5 percent in the month of June versus June last year. In the past, the challenges start to occur in July and onwards when revenues starts to fall off from target. The sharp slowdown in cigarettes sales reported by Carreras could negatively affect special consumption tax revenues going forward for a while at least.
Carreras takes a big hit but tax recovery starts
August 1, 2013 by
The only good news from Carreras‘ first quarter results is buried in the notes to the end of the quarterly report. Namely, the Tax Authority has made arrangements with the company to offset current tax liabilities against the amount owing and that they have so far recovered $338 million during the latest quarter.
Elsewhere, revenues plummeted from $3.1 billion in June 2012 quarter to just $2.155 billion, a sharp 30 percent drop that is not all coming from the recently announced smoking ban. Profit after tax fared even worse than the fall in revenues dipping by 40 percent. That is not good news for the stock which has been declining ever since the ban on public smoking was announced.
An interesting development is that gross margin improved to 100 percent from 90 in the 2012 similar quarter and 86.5 percent for all of the 2013 fiscal year. The price increase earlier this year has clearly had a negative impact with the company’s customers, which seems to have taken a big bite out of sales. A look at sales in 2012 showed a big jump in the last half of the year coming into the March 2013 quarter, suggesting that distributors were stocking up on the product in anticipation of price increase and stopped stock piling once the price adjustment was implemented. As such, the fall off in sales may not be as bad as it appears on the surface.
Expenses rise | While revenues plummeted, expenses did not. In fact sales & marketing went up by a third to $207 million from $152 million and administrative expenses from $278 million to $320 million, a 15 percent jump.
Tax Recovered | The tax now recoverable is down to $1.4 billion from $1.733 billion at the end of March. If the tax authority allows a full recovery, then the full amount of the current liability could be recovered this fiscal year and most likely be distributed as dividends to shareholders.
Carreras ended up with cash funds of $3 billion at the end of June, equity is at $3 billion or $6.30 per share. Current liabilities are at $2.6 billion which includes tax payable of $1.5 billion against current assets of $4.1 billion.
These are clearly times of uncertainty for the stock with the fall in revenues and the smoking ban that no one really knows what impact the ban will have over the next few months. With the stock not having a great deal of bids in the market currently, it’s anyone guess where the price will settle in the short term.
Carreras cut the latest dividend from $1.50 paid last year August, to $1 to be paid in August this year, an amount that is in line with the latest quarterly profit.
Related Posts | Dividends: Carreras cuts, Grace ups | JSE: Ban hitting investors harder than smokers | Carreras grew income
