Company Results — Page 93

Cargo Handlers profits up 38%

May 16, 2013 by IC Insider.com

Cargo Handlers enjoyed a boost in revenues and a 38 percent increase in profit for the six months to March this year. The business is an uncomplicated business, it deals in one main area providing stevedoring services on the wharf in Montego Bay. The company has plant and equipment of with a book value of $11.5 million, an indication of its size. Current assets on books at March this year was $134.6 million and current liabilities $36.2 million. Included in current assets is cash of $102 million. There is no interest bearing debt, another indicator of simplicity.

What the company may lack in sophistication is more than made up in its ability to earn positive and quite robust profits. For the March quarter, the company bettered the earnings of 2012 by netting $18.9 million this year compared to $15.98 million in the 2012 first quarter from revenues of $40.6 million and in the 2012 March quarter $27.7 million. For the six months to March, revenues are up 35 percent to $82.3 million. Earnings per share for the quarter came out at 45 cents and 98 cents for the six months.

The results were achieved despite a $10 million increase in operating expenses compared to what was incurred in 2012 when $9.7 million was incurred in this area. On a year to date basis, $37.7 million was incurred for this cost item versus $28 million in 2012.

The stock is an income play with a high pay out rate. In the last twelve months it paid dividends of $70 million.

Filed Under: Company News, Company Results Tagged With: Cargo Handlers, JSE Company

Big jump in H&L profits but small sum

May 16, 2013 by IC Insider.com

Hardware & Lumber enjoyed moderate increase is sales for the March quarter of this year. Revenue amounted to $1,547.8 million, a mere 2.4% more than the $1,511.8 million reported in the same quarter in 2012. At the same time, net result for the quarter was a profit after tax of $9.9 million compared to a loss of $5.2 million in 2012. This translated to earnings per stock unit of $0.12.

Gross profit increased by 6.2% to $408.3 million, achieving an average margin of 26.4%, a full one percentage points higher than the comparative quarter. Management attributes the improved performance to increased sales, greater focus on margin management and the integration of the wholesale segment into the Rapid True Value operations. Effective January 1, 2013, the company re-organised its operations into two operating divisions, down from the previous three, which saw the wholesale segment subsumed into the retail segment.

While there was improvement in gross margin, operating expenses increased at a much faster pace than sales by increasing 8.5 percent to $394.3 million. Gains made from operational cost-saving initiatives and ongoing control of discretionary spending were not enough to offset the significant increase in the charges associated with the company’s pension scheme and other retirement benefits. In a release to shareholders, management stated that the revision of the accounting rules governing such benefits, which became effective January 2013 triggered a restatement of the expense recorded in 2012 and a significant increase in the carrying value of the liability in the Statement of Financial Position as at December 2012.

Working capital management continued to receive management’s focus. At March, inventory balances were $1,158.4 million or 13.9% lower than the balance at March 2012. Over the same period, improved credit management resulted in a 4.9% reduction in trade and other receivables balance to $459.9 million. At the end of the period, the amount owed to trade and other creditors was $913.2 million, being 3.1% lower than the balance at March 2012. Total cash generated from operating activities was $209 million with $57 million used to service loan commitments and pay dividends, leaving cash balance of $357.8 million at the end of the period.

Stock outlook | Earnings should pick up as the year progresses and IC Insider.com expects to see much higher earnings for the full year than in 2012.

Filed Under: Company News, Company Results Tagged With: H&L, JSE Company

Honey Bun not so sweet in Q1

May 15, 2013 by IC Insider.com

Junior market listing Honey Bun reported revenue growth of 18 percent in the first quarter of this year but that is slower growth than the near 25 percent growth for the first six months of its financial year. The company generated 189.6 million in sales in the quarter, up from $160 million in 2012 and for the six months $381.5 million versus $305.8 in the prior year. Growth in revenues lagged the increased direct costs in the quarter. Management attributed the shrinking margin in the quarter to rising prices for flour and other inputs which could not be passed on to consumers at the same pace as the cost hikes.

Profit for the quarter was $23.2 million which was marginally lower than the $23.8 million garnered in 2012, and for the six months $38.4 million was generated versus $33.64 million to June 2012, or 14 percent.

A major part of the flat results in the quarter is a one third jump in administrative and other expenses to $41.6 million, up from $31.3 million a year ago. The increase is in line with the costs in this area for the December quarter.

Healthy finances | The company remains in a healthy financial state with working capital at a ratio of 3 to 1 inclusive of cash amounting to $70 million. This cash is up from $24 million at the end of September last year.

Receivables grew at the end of the quarter to $85 million compared to $57 million in 2012. However, with Easter coming towards the end of March, this would have resulted in most sales taking place towards month end, thus leading to a buildup in this item.

Management indicated that the receivables increase is due to the growth by over $10 million in monthly sales when compared to the prior year and also due to $16 million prepayments made on equipment and property. Payables also increased mainly as a result of the general increase in purchases to meet higher sales and the higher cost of goods year over year. Management went on the further state that sales improvement was as a result of increased sales to new markets and exports, which increased by over 150 percent, year over year for the 3 months.

Equity was $294 million and loan borrowing at a low of $14 million. The stock last traded at $4 each. This year’s earnings could end up at between 50-60 cents. The September’s quarter’s results are difficult to predict as that is the worse quarter of the year for them.

Filed Under: Company News, Company Results Tagged With: Honey Bun, JSE Company

Profits up at Jamaica Producers

May 15, 2013 by IC Insider.com

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Jamaica Producers (JP) recorded improved profits for the quarter ended March this year, with after tax profits up 30 percent, hitting $85.5 million for the company’s shareholders. The 2013 performance compares to $65.8 million reported in 2012. The improvement is in spite of finance cost rising by $22 million and taxation by $42 million. The group’s directly managed operations did not fare as well as in the prior year as a $43 million profit made in 2012 was turned into a loss of $12.6 million. Damage to the agricultural segment by hurricane Sandy resulted in a loss in that division of $55 million which compares unfavourably to a profit of $38 million last year, as revenue declined $89 million to $450 million. The group is reporting improvement in its European operations with a profit of $60 million, which is up from just $7.4 million in 2012.

Revenues | Overall, revenues moved up from $1.74 billion in 2012 to $1.86 this year. Profits were helped by gain on sale of fixed assets and investments amounting to $98.7 million. In 2012, gains were $40 million and the 2013 gain was offset by a one-off charge of $36 million. Share of associated company’s profits contributed $99.6 million versus a small loss in 2012.

Dom Rep operations fully-owned | JP acquired ownership of all the shares in the Dominican Republic operations where banana chips are produced for the Latin American market. The company says it benefited from growth in exports of juice to northern Europe from its Holland juice operations, cost cutting and increased efficiency from a new packaging plant.

Financially strong | The group has equity of $5.2 billion and loans of $1.2 billion of which just $68 million is due within twelve months. Short-term liquid funds amount to $485 million at the end of the quarter. The challenge for JP is to build on the performance of the first quarter and show satisfactory improvement in its core business to justify the investments in those areas.

Stock outlook | The 2013 performance so far could help the stock price recover some of its former sparkle. How much is uncertain.

Filed Under: Company News, Company Results Tagged With: Jamaica Producers, JSE Company

Salada’s stock price may be stuck

May 13, 2013 by IC Insider.com

Salada Foods, best known as producer of Mountain Peak instant coffee, reported lower profits for the March 2013 quarter as sales were lower, emanating from price reductions implemented to stimulate sales and market penetration. The reduction resulted in sales for the quarter falling 15.6 percent to $141 million a $26 million decline. Six months sales were up nevertheless by 2.5 percent. Administrative expenses rose 27 percent to $40.6 million to $50 million for the six months period. The increase is attributed primarily with the commencement of operations for Mountain Peak Foods which is the company used to acquire the Roberts brands of processed condiments.

For the six month period, sales were $294 million and $286 million in the similar period in 2012. Profit for the period after tax came in at $55 million while the 2012 net figure was $54 million.

Salada is clearly very conservatively managed as can be seen from some of the financial ratios. The company has a large current asset ratio of 9 to 1, well above accepted norms, with cash of $223 million. There was no interest bearing debt on the books and equity was a high $668 million.

Stock outlook | The earnings for this year which ends in September should exceed a $1 per share. This could mean that the stock may not have much room to climb in the current market environment. There are limited supplies of the company’s stocks to trade, so anything is possible with the stock price if demand comes in for them.

Filed Under: Company News, Company Results Tagged With: JSE Company, Salada

Profits on the improve for D&G

May 13, 2013 by IC Insider.com

Desnoes & Geddes is reporting improved results for the nine months to the end of March this year with profits after tax up 30% to $1,050 billion, however in the latest quarter, profits was down 18% to $243 million after tax. The company took a $152 million charge, in the third quarter for making workers redundant, flowing from the decision to transfer the sales and distribution of its products to Celebration Brands, a joint venture company with Pepsi. The company’s management indicates that the amount written off in the quarter is 50 percent of the total separation cost. Based on these numbers Investor’s Choice, a sister publication to ICInsider.com, is projecting 66 cents per share earnings for the year after the one off staff separation cost, but expect earnings to close in on $1 per share in the 2013/14 year as growth in sales and cost cutting improve profits.

Overseas production | The results reflect the decision last year to switch the production and sales of Red Stripe to the USA. Export sales are down as a result, but so is cost relating to exports. The difference is a plus for the bottom line for D&G. Marketing cost is one area of major savings as the company no longer picks up that cost in the USA market. Gross margin for local and exports climbed during the nine months period. Local sales grew to $2.67 billion up from $2.56 billion in 2012 and for exports it was $564 million in the current fiscal year versus $450 million, but exports earnings jumped to $530 million after marketing cost, a large improvement over $127 million reported in 2012. General selling and administration cost rose from $906 million to just $938 million for the 2013 period.

Local sales climbed 12 percent over the same period in 2012 and was driven by the launch of the new beer, Talawah, a stronger performing spirits portfolio and price increase, the company reported. Local marketing cost increased by $21 million primarily due increased spend to promote and televise Red Stripe Premier League football.

Financial position | The group is in a healthy financial position as the improved results have contributed to cash moving from $230 million in March 2012 to $1.964 billion, after paying $560 million in dividends in December last year. Current assets exceed current liabilities comfortably by almost two to one, borrowed funds were only $157 million.

D&G has in the past stuck to paying out around 80 percent of profits as dividends and if this policy is maintained then the upcoming dividend to be considered this week should be around 30-35 cents per share. With the present price being $4.15 the annual yield will be around 12 percent making the stock very attractive.

Stock outlook | Investor’s Choice’s analysis points to the prospect of potential good growth levels for this company, as the local economy as well those overseas, show improvements in the years ahead. The major risk to this company is any weakness in the economy and potential for government to impose addition taxes on the products. On the positive side, the company is dominant in the local market and is enjoying increased acceptance of the flagship product Red Stripe overseas.

Filed Under: Company News, Company Results Tagged With: D&G, JSE Company

Grace looking up

May 10, 2013 by IC Insider.com

Grace Kennedy posted increased profits in spite of a one-time charge of $216 million in the first quarter of this year. The charge relates to the write-off of premiums on investments that were swapped in the government debt exchange in February. The improved results flowed from revenues which were up to $16.5 billion in the quarter from $15.85 billion in 2012 and profit before tax $1.14 billion and $689.7 million after tax and minority interest, slightly more than the $652 million netted in 2012.

NDX plunged the banking and finance division into an operating loss of $7 million, down from $209 million in 2012. The trading operations more than doubled operating profit from $22 million to $55 in 2013. All other divisions contributed moderate increases to the groups operating results for the quarter.

Growth markets | Management stated that the food division performed well with improved profit. Jamaica, Canada, Belize and the USA were leading markets for them. Grace‘s international business benefited from marketing efforts with the main focus on consumer acceptance. The focus on newer markets is going well. The west coast of America expansion is on target whilst they have seen gains in shelf space in the UK top retail chains. Lower yields on government bonds have forced shifts within some of the group companies. Other segments within the group will benefit from lower cost of funds as interest rates on some instruments have declined since the NDX.

This year’s results are commendable. If the company can maintain or improve upon the first quarter numbers, earnings for the full year could beat last year’s and the year’s results could come in around $11 per share. The group has also increased the dividend payout to shareholders making the stock a bit more attractive with a 17 percent increase in the last one paid out in March.

Financial position | Grace’s finances are in good health. Assets amount to $104 billion including fixed assets of just $7 billion. Liabilities are $72 billion. Equity capital is $30.7 billion.

With economic growth in the local economy at low levels and likely to be that way for some years, Grace needs to look outside Jamaica for higher growth levels than they have been enjoying having been dominant in most areas that it operates in the local market.

The stock is cheap, selling at around 5 time earnings. Growth has not been great and may not be so for a while, but with the present price between $55-56 per share the stock has lots of room to grow. It is worth a serious look.

Filed Under: Company News, Company Results Tagged With: Grace Kennedy, JSE Company

Sagicor undervalued despite $B NDX hit

May 10, 2013 by IC Insider.com

Sagicor Life group got hit with a billion dollar charge — the product of the Government of Jamaica’s debt swap in February. The Group exchanged $60.65 billion of GOJ securities for new securities with lower market values, lower coupon rates and extended tenors. The bond exchange resulted in “one-time” realized capital losses of $1.11 billion and lower interest will be earned on the new bonds going forward. To the end of March, the reduction in interest was $83.25 million. In addition, there was expense of $48.1 million for asset tax, which was introduced in June 2012 as stated by management in a release accompanying the first quarter numbers.

NDX effect | Despite the effects of the NDX debt exchange and increased taxes, Sagicor Group posted a net profit of $620.15 million for Q1 2013. In the first quarter of 2012, a net profit of $1.49 billion was earned. The Q1 2013 basic earnings per stock unit was $0.16 (2012: $0.40) and the annualized return on average Stockholders’ Equity was 8% (2012: 20%). Total Comprehensive Income including, net profit for the period and movements in reserves held in Equity, was $1.06 billion and the amount for 2012 was $2.04 billion. For the 2012 financial year the group reported audited profits due to Sagicor’s shareholders of $5.8 billion or $1.54 per share.

The release went on further to state that the group’s insurance business performed relatively well but the banking arm faced challenges. Revenue would have been up about 9% but for the impact of the NDX. Net Premium Income, in aggregate, was 6% more than that for 2012. The Individual lines of business earned premiums up by 10% while Group Insurance and Annuity premiums were up by 3%. There was good new business across all lines in the first quarter contributing to strong growth in the in-force policies.

Investment income, before interest expense and capital gains was higher than in the prior year by 2%, including lower coupons in March on some GOJ bonds. Capital gains, for other than NDX security trades, and fair value adjustments were 28% lower than in 2012. Fees and Other Revenues were ahead of prior year by 59%, mainly influenced by higher current period unrealized foreign exchange gains from devaluation of the Jamaican dollar. The life insurance arm paid out 17 percent more on insurance claims due to higher mortality rate and growth on business.

Sagicor boasts total assets of $180 billion, with equity of $33 billion, making it one of Jamaica’s largest financial institutions. Total revenue for the quarter was $7 billion versus $7.5 billion in 2012 and for 2012 equity was $31.5 billion.

Maturity | The life company has reached or is close to maturity in the local market for insurance while the banking arm will need to fight hard to make any meaningful impact on Sagicor’s profits. Management is clearly seeing this, hence the decision to move into Costa Rica.

Stock outlook | The stock for the group is trading around $8 and is considered undervalued by IC Insider as earnings from ongoing operations should range between $1.60-2.00 based on existing business for this year when the one-off NDX charge is removed. Investors should note that historically the PE ratio of this stock has been much higher than for most in the market, which makes the stock a steal at current prices.

Filed Under: Company News, Company Results Tagged With: JSE Company, Sagicor

Carib Cement profit mired in concrete

May 10, 2013 by IC Insider.com

Badly financially structured, the lone Jamaican producer of cement and gypsum, Caribbean Cement Company continues to be under concrete with huge losses weighing it down and in spite of recent price increases, the company is still reporting losses as shown by the 1st quarter 2013 results. Unfortunately, when analyzed, the interim results do not shed any light as to when its fortunes will not only change for the better but when will it start making returns to its owners.

Although local sales are up from 143,316 tonnes last year to 151,862 tonnes this year, export sales was down and revenues were up to $2.646 billion aided by recent price adjustments. In 2012, revenues came in at $2.3 billion. The improved revenues helped to turn around the profit, before depreciation interest and devaluation losses, to $184.25 million up from a loss of $377 million in 2012. Even without any foreign exchange loss the company needs another 10 percent increase in revenues, net of expenses, to be somewhat safe.

Price increases | In January the company increased cement prices by 16.5 percent on average and 3 percent in April as well. Interestingly, in spite of the January increase and a 9.2 percent increase in July last year and increased volume of local sales, revenue for cement is up only 15 percent over that of 2012, well below the price adjustments. Admittedly, the decline in exports would have impacted income growth.

As stated by management in a release, total sales volumes declined when comparing first quarter of 2013 with the first quarter of 2012. However, domestic sales volumes, which are essential to the company’s viability, increased by 6.7%. The improvement in domestic sales was entirely due to increased market share as the overall domestic market declined. This increase in domestic sales, along with increases in selling prices and further improvements in clinker production have resulted in a $561 million improvement in Earnings before Interest, Depreciation and Tax [EBITDA] over the corresponding period for 2012.

Management went on to further state, that the negative Group equity increased to $3.44 billion and with the significant build up in clinker inventory during this first quarter as production exceeded sales, the Group could not continue to operate without the financial support of the parent company, Trinidad Cement Ltd. Management is pursuing various strategies to improve both domestic and export sales and it is proposed that a significant portion of the debt due to the parent company be converted into equity during the second quarter.

Messed up | Caribbean Cement has messed up so many times in recent years that it will take a massive change in its financial fortunes to restore investors’ confidence. The first error is that the company totally mistimed the plant expansion by not anticipating the increased in demand in the mid-2000s. As a result, they missed most of the increased demand and the expanded plant only caught the tail end of it. Secondly, the company missed a glorious opportunity in 2004, when the stock price was sky high, to raise added capital in the local market to help fund the expansion. Finally, there is no evidence that they forged the right political connections or presented a viable plan to ensure continuity in cement supply, thus opening the market to unneeded imports which severely hurt them and from which they continue to reel.

Minority shareholder to be battered | The contemplation to convert debt to equity by the parent company, could negatively affect shareholders’ value if the conversion is to ordinary shares. If the conversion is to redeemable preference shares that would be a far different proposition, as preference are quasi debt and equity.

Filed Under: Company News, Company Results Tagged With: Caribbean Cement, JSE Company, TCL

J$ slippage pumps up Mo-Bay Ice

May 9, 2013 by IC Insider.com

Montego Bay Ice Company shed two major loss making operations last year and the move is paying off with a small operating profit in the first quarter to March. However, it was the slippage in the exchange rate for the Jamaican dollar that had a profound effect on profits. The Montego Bay based company, while reporting reduced income of $4.188 million compared to $7.7 million in 2012, recorded $3.8 million in profits before tax after picking up a nice $3.77 million in foreign exchange gains.

After taxation of $310,000, the company is reporting after tax profits of $3.49 million, well up on a loss of $372,000 in 2012. After accounting for profit that is due to minority interest in a subsidiary, the shareholders of Montego Bay Ice ended up with $2.4 million. The group principal activity is now the rental of properties and cold storage facilities as they discontinued the retailing of ice and the sale of bottled spring water in July and November 2012 respectively.

The group still has work to do to radically transform its profitability. Ignoring the gains from foreign exchange holdings, revenues were just able to cover expenses leaving less than $60,000 as surplus from what can be regarded to be normal ongoing profits.

The company has improved its cash position, now having $64.8 million in liquid funds amounting to around ten dollars per share. Hopefully, management will manage these funds well to help improve profits and not necessarily hold the bulk of it in US dollars hoping for a further Jamaica dollar slippage. Liabilities are not much, at less than $4 million and receivables are even less at $1 million.

Stock outlook | Montego Bay Ice needs to find the right business to move into to return to regular and predictable profitability so that investors can reap the benefit from their investment in the company.

The company’s shares have not traded since November 2011 and it traded $18.00 which is around book value. The real value may be twice this amount if the properties it owns were factored in at market value.