Caribbean Cream, producers of the Kremi ice cream, has been spending big bucks for expansion and growth. That action has seen a major improvement in sales but little change in profits for the six months to August. While sales revenues climbed 20 percent in the two quarters this fiscal year, profit is down in the second quarter to August from $7.9 million to $1.35 million and for the six months, profit is flat at $17.8 million.
Gross profit climbed 29 percent to hit $58 million, but margin fell in the August quarter to 30 percent from 37.8 percent in the May quarter, putting the six months margin at 34 percent, from an increase in the gross profit of 44 percent, to $127 million from $88 million. Profit margin has improved in 2014 over the levels in the first and second quarters of 2013. Last year, gross profit margin was 26.5 percent for the August quarter and 27.3 percent for the half year. Management in their report to shareholders, indicated that the slippage in profit margin in the August quarter, is due to unexpected repairs and maintenance of equipment, as well as increased depreciation charge.
Forecast| Based on greater sales in the last half of the fiscal year, margins are expected to move into the 80 percent range, as direct overhead costs are fairly static. IC Insider is forecasting earnings of $77 million or 25 cents per share for the year ending April 2015, from projected revenues of $1.05 billion. The Kremi brand is now being introduced to the retail market to compete with other brands, mostly imported, on the shop shelves. Its better taste and pricing should ensure an increasing presence and sales in the future.
Financials| In the last 12 months the company acquired fixed assets amounting to $212 million, pushing total fixed assets net of depreciation, to $400 million, from $221 million at the end of August 2013. Inventories climbed to $115 million from $69 million a year ago, due to increased containers and raw materials, to facilitate expansion of the product line and increased sales. Receivables fell from $70 million to $33 million. Cash that was at $63 million has been used up leaving less than a million dollars at the end of August. Borrowings climbed to $163 million from $141 million, at the end of 2013 second quarter. Amounts due to creditors ballooned to $130 million from $61 million the year before.
Kremi invest for future growth
Paramount on a role profit jumps 79%
Sika one of the brands Paramount handles
The improved results for the latest quarter, came from a 19 percent climb in revenues over the similar period in 2013, with revenues of $207 million versus $173 million in 2013. The latest quarter’s revenues are the highest the company has had, since listing in 2013. Gross profit margin was maintained at 46 percent the same as in the 2013 August quarter but slightly down on the full 2014 fiscal year’s 48 percent. Of import, is a new line of lubricants launched during the quarter but sales are in their infancy. According to a company executive, the increased sales is mostly from new customers added as well as increased sales of a product to an existing customer, who was not supplied with that product last year.
Administrative, selling and distribution cost, fell from $32 million last year to $31 million in this year’s August quarter. Profit is projected to by IC Insider to come in around $152 million in 2014/15 year or around $1.15 per share. At the current price of $2.50 the stock would be priced at a PE of only 2.2 making it a very good buy, bearing in mind that that many junior listings have been valued around 8 times earnings in the recent past, and around 6 times now.
Financials| The profit for the August quarter provided a strong 39 percent annualized return on the equity, based on $345 million at the end of May. Borrowed funds amounted to only $40 million, compared to the level of equity. Cash is up from $56 million at May to $90 million, while receivables climbed to $178 million from $172 million at May, this year. But the figures include more than just trade receivables, with the latter being under $150 million. Still high but one of the company’s executive stated that they are actively managing this area and have put in place measures to mitigate losses. Inventory at $203 million is flat with the amount at the end of May, this year, but payables moved up to $137 million from $128 million at May. With a new level of stability in the value for the Jamaican dollar, inventory levels may be reduced going forward as there would be little need to hedge against the devaluation of the local dollar.
The performance of the company during the quarter, and for the 2014 year would normally elevate the stock to BUY RATED status but the high level of receivables of more than two months, is a concern, especially in an economy, as tight and difficult as the Jamaican one at this time.
Ethanol hurts profit but US to boost it
Jamaica Broilers’ ethanol plant
The results for the first quarter to August, also suffered from increased taxation of $6 million and finance cost of $21 million, resulting in profit after tax declining moderately to $111 million versus $128 million last year. After factoring amounts due to shareholders in subsidiaries, the decline in profits for the group widened, with profit of $114 million, down from $140 million in 2013. Ethanol was not the only area that delivered losses. The category Other operations, saw a negative turn-around from a profit of $39 million in 2013 on revenues of $310 million the division made a loss of $21 million on revenues to third parties of $373 million to August.
The US operations was the crown jewel for the quarter with much improved numbers. Revenues in the division from third parties jumped from $805 million to $1.58 billion and contributed $287 million in segment profit compared with $76 million in 2013 and profit of $333 million for the 2014 fiscal year. The change was substantially due to the acquisition in 2013 of the poultry operations in the USA.
The Best Dressed foods division contributed revenues of $3.82 billion up from $3.5 billion in 2013 and segment profit of $235 million in 2014 versus $234 million in 2013 and the HIPRO-ACE division’s revenue was $2.1 billion down from $2.16 billion in 2013 with profit of $157 million for the 2014 period compared with $149 million in 2013.
The company’s management reported that they are “ responding to approaches from a number of parties who have expressed interest in entering new fuel processing contracts.” With the price of oil at $81 per barrel and prediction that it may go lower, the question to be asked is will there be short term viability of this operation?
Cash down borrowings up| Broilers saw a big increase in inventories over the August 2014 level a as well as for the April year end rising from $3.5 billion a year ago and $3.7 as of April to $4.8 billion for a billion dollar increase. Cash and equivalent dropped from $1.42 billion in 2013 to just under $1.2 billion, amounts tied up in receivables was slightly down to $2.7 billion and borrowings climbed to $6.7 billion from $5.3 billion in 2013.
For the year to April the ethanol division made a loss of $66 million and the Other operation, reported a profit of $452 million having made a profit of $340 million in the last period of the fiscal year. Some of the inputs into chicken processing have declined on the world market and therefore could lead to increased profit margins that along with what should be a substantially, increased profit from the US operations, should see profits for the current year rising well above the 80 cents per share or $957 million made in 2014.
Producers’ improving performance
Jamaica Producers HQ in Kingston Jamaica
For the half year to June, net profit attributable to shareholders was $138 million, a 13 percent decline, compared with the similar period in 2013. This year’s performance only had $17 million of gain on sales of fixed assets and investments compared with $105 million in 2013. The 2013 result was negatively affected by $36 million in restructuring cost, there was no such charge this year, resulting in the quality of earnings from ongoing operations being better than in 2013.
Europe| In the 2014 second quarter, the Europe division earned revenues of $1.78 billion and pre-tax profits of $167 million, a 33 percent increase in revenues and 196 percent increase in pre-tax profits relative to the 2013 second quarter. Europe is still facing tough economic conditions, resulting in further monetary easing recently, leading to the Euro slipping sharply in value. This development could negatively affect Producers profit for the rest of the year. The results for 2015 could benefit from the monetary easing as the economy could benefit from the stimuli. The local currency could stay stable for some time thus robbing it of the gains make due to currency slippage in the first half of the year.
JP Tropical Division includes businesses located in the Caribbean that faced particularly challenging production and trading environment that adversely affected margins. The division experienced a loss during the 2014 second quarter of $43 million compared to a profit of $27 million for the same period in the prior year, although revenue grew 25 percent. The loss to JP shareholders is $20 million.
JP Tropical Foods experienced growth in its snack foods product lines, particularly in the USA and UK markets. During the quarter, we launched a new tropical snack brand of plantain and cassava chips for the Dominican Republic market.Gross profit climbed slower than operating revenues at 24.7 percent in the June quarter to $549 billion but was in line with revenues in the year to date period with gross profit rising 17.8 percent to $977 million.
Subsequent to the quarter the group acquired 11.59 percent more Kingston Wharves shares raising its stake to approximately 42 percent to become an even more dominant shareholder of the company. The rate of return on this latest investment is likely to be around 8 percent, or just slightly better than government of Jamaica current Treasury bill rate. But Producers’ focus would be on the longer term growth prospects that will accrue from the expansion of the port, and the increased business that they expect, especially with the opening of an expanded Panama Canal.
The main activities of the group are juice and food manufacturing, the cultivation, marketing and distribution of fresh produce locally, logistics, land management and the holding of investments.
Finances|At the end of June, the group had debt close to $1.2 billion, that should rise with the acquisition of the Kingston Wharves share purchase, as it was partially funded by borrowed money. Equity stood at $5.9 billion and they had cash funds and investments of $987 million. Current assets to current liability was below norm, at $2 billion to $1.5 billion.
Encouraging results| The results for 2014 so far is encouraging, importantly, Jamaica Producers is adding new products to the existing lines, both in the Caribbean and Europe, this is one of the surest ways of improving profitability as it is less costly to add new lines as much of the overheads cost are already built into the system. This is clearly a stock to be watched.
Pan Jam profit up 29% for Q2
Pan-Jamaican Investment Trust enjoyed a strong 29 percent growth in profit, attributable to owners of the group, for the quarter ended June this year to $627 million. Profit of $486 million was realised in the 2013 second quarter. For the six months to June, net profit hits $1.07 billion, compared to $710 million for 2013, an increase of 50 percent.
Earnings per share amounted to $5.09 for the six months and $2.99 for the latest quarter, earnings for all of 2014 should end up around $12 per share. With the stock selling at $49, there is much room for the stock price to double, that is why it is one of IC Insider BUY RATED stock.
Total revenue was higher for the quarter compared to last year, by $125 million, or 30 percent, due to the improved investment and property income, and ahead of last year for the 6 months by $185 million, or 21 percent as the group generated income of $544 million in the latest quarter versus $419 million in 2013 and $1.08 billion for the six months, compared to $895 in 2013.
The share of results of associated and joint venture companies for the quarter is $537 million and is flat compared to last year, while the six month period share increased by 16 percent to $893 million. Last year’s results were significantly affected by the first quarter NDX impact on Sagicor.Investment income of $123 million, in the second quarter of 2014 was nearly three times higher than the $44 million in the similar quarter last year, principally as a result of better foreign exchange gains of $42 million, versus $23 million last year, and trading gains of $37 million, versus a loss of $21 million in 2013. Year to date investment income of $259 million is 79 percent ahead of 2013, due principally to trading gains of $89 million versus a loss of $29 million in the prior year. Property income grew $54 million, or 16 percent, compared to last year for the quarter and $83 million, or 12 percent, year to date.
Group operating profit for the second quarter increased by $115 million, or 73 percent, compared to last year’s second quarter. For the year to date, group operating profit of $544 million is $157 million, or 40 percent, more than last year’s level.
Operating expenses were contained to $273 million for the June 2104 quarter versus $263 million in 2013 and $536 million for the year to June from $508 million in 2013.
Total assets at June 2014 amounted to $25.1 billion, compared to $23.3 billion at December 2013. Bank and other loans stand at $4.48 billion and stockholders’ equity stood at $19.4 billion from $17.8 billion at December last year, equating to a book value per stock unit of $92.34.
Pan Jamaican is involved primarily in commercial property ownership and rental and owns just over 31 percent of Sagicor Group a life assurance and banking operations.
General Accident flat 2014 profit
General Accident Insurance marginally improved profit for the first half of 2014, with net profit rising to just $187 million, from $178 million in 2013. Earnings per share for the six months rose to 18 cents. This year’s performance is not, however, as strong as last year’s 57 percent increase for the same period. For the June quarter, profit came out at $88 million up from $80 million in 2013. Investment income for the first half of 2014 was $125 million, well below the $145 million earned, in the first half of 2013.
For the year to June, gross premiums income grew to $3.44 billion, from $3.24 billion for the first half of last year. Net earned premiums grew to $485 million, from $443 million for the six months in 2013. Premium income fell to $1.9 billion from $2.09 billion and commission income ended at $90 million from $84 million, for the June quarter. For the six months, commission income amounted to $175 million, from $117 million for 2013. The company said, the performance was “as a result of improvement in our core business of underwriting commercial property and motor insurance.”
Claim expenses rose from $310 million for the year to June last year, to $316 million in 2014 and for the June quarters from $157 million to $169 million. Management expenses rose from $165 million for the year to June 2013 by to $2055 million in 2014, and in the latest quarter, from $88 million to $110 million
Assets down| Total assets totalling $7 billion at the end of June last year has seen a major fall to June this year to $4.3 billion mainly as result of amounts due from reinsurers and co-insurers and from policy holders declined back to normal levels. Equity stood at $1.55 billion and cash and short term investments stood at $2 billion.
If the company can maintain the current profit levels then earnings per share should reach 35 cents for the year which makes the stock now priced at $1.62 cents cheap, at a PE of only 4.6.
Purity’s 2014 profit & stock price falls
Periods of major economic adjustment negatively affecting consumers, can be tough for bakeries, as demand pressures tend to squeeze margins. That is exactly what happened to Consolidated Bakeries, better known as Purity, for the first six months of 2014.
For although sales’ revenues for the period to June 2014, grew 17.9 percent over the six months to June 2013, profit fell 19 percent to $14.7 million from $24.4 million in 2013. Profit, in the June quarter fell 28 percent to $7.3 million while sales’ revenues for the quarter rose 22 percent. During the six-months, Consolidated said, exports grew 25 percent in US dollars, over the same period last year.
According to management in their report to shareholders for the June results “revenue growth over the six month period in 2013, represent growth in all product categories. This growth is a result of our strategy to grow distribution and volume. During this period, price increases were low due to market competition and in a response to difficulties shoppers face.”
Gross profit| Gross profit margin that ended last fiscal year at 54 percent, fell to 44 percent in the March quarter, 47 percent for the June quarter and for the six months 46 percent. The decline was a major factor dragging profit down for 2014. For 2011, gross profit ended at 62 percent, leaving much room for improvement for management going forward.
Operating cost| comprising administrative, selling and distribution cost, rose sharply by 21 percent for the June quarter to $57 million and 15 percent for the six months, hitting $113 million, faster than the increase in gross profit.
The company has lots of work to do, to improve gross profit margin as well as the paltry return on equity of 6 percent for 2014.
Borrowed funds amount to $57 million at the end of June at a very comfortable level with equity at $518 million. Cash funds available amount to $111 million.
Property plant and equipment was increased by $17 million up to June 2014, additional machinery was ordered to build capacity.
Watch this one| The company has room to grow faster than the economy for a while, this can make it a good growth prospects for investors looking long term. IC Insider’s forecast for earnings per share is around 15 cents for 2014. It may not be until 2015 that the earnings could show improvement to help push the stock price upwards in a major way.
Scotiabank Trinidad improved results
Scotiabank Trinidad & Tobago is reporting improved results in the July quarter, than the year before and for the April 2014 quarter. Net income after tax for the latest quarter, amounted to $140 million an increase on the $134 million earned for the same period last year. The improvement was helped by rising net income and recovery of bad loans, with the latter amounting to $8 million versus a loss of $3 million in 2013.
For the nine months to June, profits fell to $390 million from $404 million, but it represents an improvement over the decline in the six months results, with profits of $250 million versus $270 million in 2013. The second quarter results of $105 million compared with $128 million, was one of the factors pulling down the results, as net revenues fell compared with the prior year. In the latest quarter, while net interest income has not declined, it hardly grew, other income grew a bit from $100 million to $132 million for the quarter and for the nine months by $30 million to $467 million, with all the increase coming in the last quarter.
Total assets ended the period at $20.2 billion up from $19.5 billion at the year end, but encouragingly, for the bank, the main income generator, loans, grew from $10.576 billion at the end of the 2013 year, with a small increase to $10,847 in April, but it jumped sharply to $11.47 million in July. This growth should help in improve income generation going forward. The bank will need to keep close to the last quarter pace, to help move profits forward, in a serious way.
With the July quarter showing some signs of improvement, earnings going forward should end up around the $3.50 range in 2015, if the pace of loan growth continues. With the price of the stock having pulled back below $60, it could be an attractive buy in the months ahead. At the close of trading there was still no buying interest in the stock and it looks set to decline some more, as investors seem to be ignoring the improved third quarter numbers.
Profit on the rise for Dolphin Cove
The fast growing Jamaican north coast entertainment company Dolphin Cove, is reporting increased profits for the six months ended June, this year. Profit rose 30 percent to $287 million over the $221 million in the 2013 comparative period, according to the unaudited six months financial report.
For the June quarter, Dolphin made profit that is 34 percent ahead of that of 2013 to hit $139 million up from $103 million last year.
“This rise in profits is mainly as a result of the growth in revenues and supported by cost containment measures which resulted in operating expenses increasing by a lower percentage than the growth in sales. The decision to increase our investments in sales and marketing in the June 2014 quarter produced the desired results, as sales increased by 17 percent above that of 2013 and also surpassed the 11 percent increase in revenue which was experienced in the first quarter,” Manager said in a release of the results to shareholders.
Total revenues climbed 15 percent to $923.4 million for the half year, from $800 million and $471 million versus $400 million in June 2013 quarter, for an 18 percent increase.
The company would have benefited from the fall in the value of the local currency as its income is denominated in United States dollars, but much of its cost are in Jamaican dollars. The end may be in sight for a sharp fall of the local currency, even as the country in now in the period of low inflows and high demand for US dollars. So far the inflows have been buoyant, meeting demand up to the end of September with a stable rate so far. The company’s income is substantially reliant on developments in the tourism sector as it get the bulk of its income from overseas visitors for meals and the attraction of dolphins, sharks and stingrays.
IC Insider’s forecast for earnings, is $1.20 per share, for the current year ending December. In 2013 the company earned 82 cents. Based on the rise in profit, the company pushed dividends up by 50 percent for this year to date and works out at a yield of 8 percent on the stock price of $8.
Equity stood at $1.57 billion at the end of June with borrowed funds at only $355 million.
JMMB profits down in June quarter
JMMB Group posted net profit of $558 million and earnings per share of 34 cents for the quarter to June this year, but this was a huge 26 percent lower than the $754 million earned in 2013. Total revenues grew by 16 percent from $2.07 billion to $2.4 billion in the quarter helped by three acquisitions in two years.
Increased expense ate up the added income and more, pushing profit down sharply in the process. This is in contrast to the March quarter when profits rose 5 percent for that quarter. Interest margin got squeezed, falling from 69.3 percent in the 2013 quarter to only 63.74 percent this year as the Group’s Net Interest Income grew year-over-year from J$1.18 billion to only J$1.29 billion, an increase of J$112 million or 9.5 percent. This increase was driven mainly by expanded business lines through acquisition of Intercommercial Bank Limited (IBL) in October 2013, coupled with managing the Group’s investment portfolio and cost of funds.
Other operating revenues, comprising securities trading, foreign exchange margins from cambio trading and commission income increased by 12.4 percent, 95.5 percent and 32.1 percent respectively, driven mainly from increased volume.
Expansion of the Group through acquisition of IBL in the third quarter of 2013/14 resulted in operating expenses moving to J$1.72 billion compared to J$1.13 billion for the prior year. IBL contributed J$323 million or 28.6 percent, while the remaining J$272 million or 24 percent was due mainly to integration costs, growth in subsidiaries in the regional markets, and normal inflationary increases. The Group acquired of 100 percent of AIC Securities Limited, a Trinidad and Tobago based company for TT$5.36 million (J$92.7 million), on 30 April 2014. In Trinidad and Tobago operations are now poised to provide a full range of services to our clients, management stated.
Assets| At the end of June total asset of the JMMB Group increased by J$8.7 billion or 4.2 percent for the period, moving from J$206.7 billion at March 2014 to J$215.4 billion. This increase in assets was mainly funded by client deposits, long-term subordinated debt and repurchase agreements. The company acts as agent and earns fees for managing clients’ funds on a non-recourse basis under a management agreement. At 30 June 2014, funds managed in this way amounted to J$29,609,590,000 (2013 – J$23,242,771,000).
Interest rates down| During the quarter interest rates on treasury bills in Jamaica started to decline and would have resulted in some pressures on margin as commitments at fixed rates to customers would mature and then re-priced. Future looks like JMMB should still end up with earnings around $2 per share for the current year, but much will depend on how well they do in managing their investment portfolio and the impact that lower interest rates will have on valuations.