FX gains boost Kingston Wharves

May 22, 2013 by

Revenues for Kingston Wharves were up 42 percent for the quarter ended March to $1.17 billion. The amount includes $148.86 million or a 91 percent increase in interest income and a large amount of foreign exchange gains flowing from changes in the Jamaican dollar value for assets denominated in United States dollars, as well as a 38 percent increase in transshipment and domestic container movements.

Port revenues | Increased revenue and cost saving initiatives implemented by the group contributed to positively to the profit performance for the quarter. Revenues for port activities were $999 million up from $804 million for the similar period in 2012, an increase of $195 million or 24 percent. A combination of volume increases and the impact of the declining value of the Jamaican dollar are factors that contributed in a major way to the results.

Profit | Operating Profit increased 142 percent for the first quarter, moving from $155 million in 2012 to $374 million. Profit attributable to stockholders was $153 million compared to $65 million for the same period in 2012. Earnings per stock for the first three months was 10.63 cents compared to 5.90 cents for the corresponding period in 2012.

KingstonWharves150x150Without the gain from the movement of the local currency, profits for the quarter would have been much lower, which is something for investors to bear in mind in considering the company’s stock as an investment. The stock is now selling for more than 17 times this year’s likely earnings, well ahead of other companies on the market presently.

Management stated the group will be making substantial long term investments in order to participate fully in the Kingston port expansion. During the quarter, the first phase of the initiative aimed at the expansion and improvement of the range of services offered was implemented. These include steps to acquire container handling equipment and provide stevedoring services for a new client.

Financial strength | Kingston Wharves is in a healthy financial position with borrowings of $2 billion and equity of $12 billion. The group has $3 billion in cash which will be used in the expansion and modernization of the operations in preparation for increased business when the expanded Panama canal opens.

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

Consolidated Bakeries’ Q1 Profits Up

May 22, 2013 by

Consolidated Bakeries, producers of the well-known Purity brand of baked products, reported profit before tax for the March quarter of $14.2 million, 58 percent more than the corresponding period last year. Profit after tax jumped by 216 percent but the company is unlikely to be paying any taxes for the next five years under the junior market tax incentive. Revenues grew to $172 million, an increase of $32 million or 23 percent over the same period last year.

Management indicated, in a release with the quarterly results, that all key product lines grew during the quarter. Whilst revenues climbed 23 percent gross profit of 38 percent in 2012 fell to 37 percent in the quarter, and the growth in gross profit, was up 18 percent year over year. Operating expenses grew by just under 12 percent. Going forward, the company says they will accelerate operational improvements to combat increased input costs.

These developments sound great. The concerns that investors must be having is that last year’s results for the first half looked good and then, what seemed like a sudden shock, the company announced earnings of a mere $3.7 million, well below the amount reported for the 2012 first half and lower as well than the full 2011 earnings of $12.8 million. Will the market get another surprise? That is difficult to say. Management did indicate that they took a deliberate decision last year to slow production whilst attempting to get their processes right.

Consolidated_Purity150x150The company was listed on the Junior Market of the Jamaica Stock Exchange in December 2012 with the stock price trading as high as $2.05 but declined to 90 cents after the poor 2012 results were released in March.

The company completed the conversion of the tracking of routes to a computerized hand-held system which facilitates better tracking, monitoring and management of the company’s distribution process, thereby reducing costs and improving sales. Their efforts to improve operations continued with additional adjustments to the  processes and plant organization, including the appointment of both an experienced warehouse and loading manager. As a consequence, the first quarter saw significant improvements in quality and products.

The company continued exports to three overseas markets, and gained additional listings and space with independent retailers, and significantly, a major retail chain in the North America.

Current assets increased to $202 million from $96.8 million over the same period last year, primarily due to the growth in receivables of $32 million and investments and other cash equivalents by $64 million. Current liabilities increased from $69 million to $89 million at a slower pace than current assets due to the capital injection from the IPO in December last year. Consolidated has equity of $485 million, well in excess of loan funding of $48.5 million.

Management stated, “In the coming months we will build on and continue the internal changes of the first quarter, starting with additional branding and our route to market programs. We will be adjusting and or replacing equipment to our production line of single serve and bread products, at the same time increasing exposure and awareness of our brand.”

PurityFinDetails

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

Profits up 19% at Jamaican Teas

May 20, 2013 by

Jamaican Teas recorded a profit of $51.2 million for the 6 months of its fiscal year ending March. Last year for the same period, the group made $43.2 million, an increase of 18.6%.  Profit in the March quarter this year amounted to $25.7 million versus $22.2 million in the comparative period in 2012, an increase of 15.9%. Return on equity rose to 20 percent. The improved results came from growth in sales by 44% to $528.2 million, versus $365.9 million in the prior year to march. This was due to healthy increases in both export and retail supermarket sales including a supermarket in Savannah La Mar which contributed $36 million for the second quarter, compared to $12.6 million in 2012. However, during 2012 period investments sold contributed more to profits than for this year. As a result the core business contributed more profits than the reported figures suggest. According to management’s report, sale of investments in the March quarter resulted in a loss of $3 million.

Sales at the Kingston supermarket were up on the similar quarter in 2012 and the store in Savannah La Mar enjoyed steady sales during the period. It recorded its first profit in March. Management is hopeful to build on the second quarter performance, effectively wiping out, or reducing the losses experienced in the first half.

Despite tightness in the local and regional economies, the company was able to generate improved sales in the manufacturing business and more importantly in domestic manufacturing sales that contribute proportionately more to profits than either export or retail sales.

The jointly-owned supermarket in Montego Bay continues to show improvement but has not shown profit to date.  Sales in the six months rose 16 percent above the similar period of 2012. As per management, “We enjoyed an encouraging improvement in sales since the start of the quarter, pushing us closer to a break”. The group’s share of the loss is $1.6 million in the latest quarter.

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Apartment complex | An apartment complex developed by the group on Kingsway will be completed by the end of May or very early in June.  Sale of the units attracted solid buying interest with more than 90 percent having written commitments. The sale of the units is expected to be booked before the end of the financial year in September when ownership would be transferred to the new owners.  The group has plans for more developments now that the first was successfully executed.

Financial strength | The group continues to maintain a healthy financial position with working capital and investments of $388 million and this position should improve when the apartments are fully sold.  Equity was $550 million and will continue to rise.

Image from Behance.net

Image from Behance.net

Borrowings are up to $145 million from $75 million in March 2012, most of the increase relates to loans to partially fund the building of the apartment complex and is expected to be repaid from the sale proceeds. In addition, the group acquired the supermarket building in Kingston and is carrying a medium term loan on it, which was booked last year after the March quarter. The proceeds from the sale of the apartments is more than adequate to cover the total loans on the books.  The group is acquiring a property to house Jamaican Teas operations which will result in discontinuation of rent but there will be interest cost relating to loan-funding for the acquisition.

Outlook | Management says they will continue to see buoyancy in sales after the end of the quarter at all locations. “The equity portion of the investment portfolio has fluctuated with recent market volatility but in recent weeks we have seen some improvement in the prices of some of our investments. There are signs that the local stock market is picking up life and if that continues, the valuation of the investment portfolio should rise in the months ahead, thus improving the equity base of the group.”

Management concluded their report by stating that with the performance for the first 6 months, the pending sale of the apartment complex, as well as sales performance subsequent to the March quarter, suggest that results for the 2013 fiscal year should exceed the 2012 fiscal year barring unforeseen developments. At the annual general meeting, the range for profit given by the company was $125-140 million for the year to September, which works out at earnings per share of 80-83 cents.

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

Gleaner profits face major challenges

May 20, 2013 by

The Gleaner Company was able to hold down administrative, distribution and other operating expenses the first quarter of 2012 and yet the operations still ended up with a loss of $16 million, after benefiting from a tax credit of $4 million. In 2012, the company that is involved primarily in the production of newspapers, made a small profit of $25 million. To be fair, the March quarter is not the company’s best period for making a profit as that usually happens in the last half of the year and particularly in the third quarter.

That said, the profit for the full 12 months of last year was made based on investment income as there was an operating loss before investment income. That is not a good signal going forward. The company raised rates for advertising by effectively modifying the discount levels granted to advertisers. How much more revenue that will generate is left to be seen. The reality is that they need to raise revenues without alienating customers in order to boost the bottom-line. That is not easily done in a tough and tight economy.

GleanerLogo150x150Revenues in the quarter were flat coming out at $774.7 million compared to $774.4 million in 2012. Gross profit fell $39 million, down to $360 million thus ensuring there would have been nothing left to cover other costs.

The reality is that the Gleaner is having a torrid time. First, with the exit of one telecom carrier from the local market which resulted in less competition, there was a reduction of advertising revenue for all media houses. Secondly, Internet access has reduced the desire and in many cases, the need to purchase newspapers. Not to be forgotten is the variety of media outlets that dilutes advertising revenues for each media house.

Financial status | The Gleaner is in a healthy financial position with a fair amount of cash and short term investments and little debt. A few years ago they sold off the subsidiary Sangster’s Book Store. That decision seems like a smart move as the sale gave them cash inflows to help through a difficult period including some recent years of losses.

Stock outlook | The company’s stock price has fallen to a low of $1.10 recently and has enjoyed a small bounce since to reach $1.20. It will be difficult to see wide spread interest, though the price could be considered cheap based on likely earnings. The only problem is these earnings are not likely to be sustainable. Sooner than later, the core business needs to start delivering profits.

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

What’s really up at Seprod?

May 20, 2013 by

Revenues are down to $3.6 billion for the March quarter for Seprod, who manufactures and processes oils, fats, cornmeal, soaps, milk, sugar and run a cattle farm. In the 2012 period, the group recorded revenues of $3.7 billion. Profit followed in the path of revenues slipping to after tax profit of $231 million compared to $292 million in the 2012 first quarter. While sales declined, cost of sales moved up, resulting in just over $100 million less gross profit. Costs in other areas were kept well within the amounts for the previous year. Had it not been for a significant foreign exchange gains, the decline in profits would have been far worse than reported.

It was the cash generated from operations that is eye catching with nearly $500 million generated in the first quarter this year. Those figures translate to $2 billion per annum. However, these numbers include income from the sugar operations and for the rest of the year this operation will provide no sales for fresh inflows. The company also benefited from $95 million in FX gains which is unlikely to recur this year. Hence, the cash inflows will be much less and more likely to be just over a billion dollars for the full year. Loan payment of $330 million has to be made in the next 12 months and could reduce the net cash inflows along with the payment of dividends which would use up more than $400 million.

Seprodlogo150x150Seprod has $3.7 billion in cash and investments plus $253 million to be collected from short term receivable in the next 12 months from March. The big question is, what are the funds being piled up for?

Sugar operations | Long term loans increased by $977 million in the quarter primarily for use in the sugar operations. The target for sugar production is based on processing 300,000 tonnes of cane that should work out to around 25,000 tonnes of sugar and that all depends on the sucrose contents of the canes. Added to that, St Thomas, where the operations are, has heavy rainfall close to the beginning and the end of the crop each year. The timing to reap is critical in maximizing the quantity of sugar that is extracted from the canes.

Management indicates that the expanded cane farms are already planted and the increased production should be coming in the 2014 crop. The group acquired Bowden Estates with 3,000 acres and another property in the area plus lands that were in bananas are now planted out in cane. For the current year’s crop 18,000 tonnes of sugar were produced at about a break even level. If the important things go well and they make close to next year’s target, the operations should end with a profit.

SeprodCaneFactory150x150Management states that the sugar company is critical to them as a foreign exchange earner for the group. The sugar factory can be pushed up to grind 400,000 of cane but no decision has been taken on that. It would require major capital injection to get to that level of production. The cost of energy for the group is an important area of focus and thought has been given to increase the generation of power at the sugar factory and wheel it to others in the group. The estimate for such a project would be in the order of US$15 million, which would allow for the installation of new broilers to power the factory using bagasse, the byproduct of cane milling, to generate heat and steam for electricity thus cutting the overall energy cost for the group.

The company indicates that they are always on the lookout for acquisition. The funds being built up are to allow for acquisitions when suitable ones arise as well as for capital spend. But the main focus is to fully turn around the Duckenfield sugar operations. That objective is important since Seprod profits have been stagnated subsequent to their investment in sugar production. It has proven much more difficult than most of the directors first thought possible. At the first annual general meeting, one shareholder warned them of the challenges they were going to meet. Three to four years later and after more capital injection than originally contemplated, management has had enough time and experience to appreciate the unsolicited advice.

Notwithstanding the challenges faced, the group is in a very healthy financial state with $9 billion in equity and a relatively small amount of debt. Working capital is also in good nick as well.

Stock outlook | The company’s stock last traded at $15 and seems fully valued based on current market conditions. Investors will need to bear in mind the softening in the price of sugar on the world market and commodity prices in general which could push up the breakeven level and continue to have a drag on profits as well as eat up more capital. These risk factors need to be factored in when considering the investment in this stock.

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

Growth slows for Dolphin

May 16, 2013 by

Dolphin Cove seems to have reached a stage of relative maturity in the Jamaican Market as evidenced by a moderate revenues increase of 9 percent in the March quarter this year compared to the prior year. Management indicates that the level of increase experienced is due largely to their marketing and selling efforts.

This increase in revenue primarily contributed to a 7 percent increase in net profits when compared to Q1 of 2012. In the quarter, profits of $117.5 million was made while the 2012 figure was $110 million. The company delivered total revenues of $395 million in the quarter and in 2012 $363 million.

Expenses increased at a higher rate than the increase in revenues, particularly at the Hanover Park due to the allocation of more of the central administrative and marketing costs to that operation than in the prior period. Overall, team member costs increased by 10 percent as of May 2012 which affected Q1 2013 and not Q1 in 2012. The other parks recorded an increase in profits of 67 percent as the Half Moon Hotel’s new management has delivered better attendance, the company stated in a release with the results.

dolphin150X150Management expects that the reopening of several hotels which have been closed for renovation or expansion and the change of hotel brands such as Breezes Runaway Bay and Hedonism 3 to Jewel and also Ritz Carlton to Playa, (operators of the Secrets and Barcelo brands) should have a very positive effect on park attendance . The planned reopening of the Starfish Hotel in Trelawny and the expansion of RIU in Montego Bay to open later this year should give a further boost.

Financial Finances are in a very healthy state even after funding expansion from internal sources. Cash funds held at $150 million, current assets exceed current liabilities 2 to 1, which means they are in a great position to fund short commitments. Equity is $1.2 billion and debt capital is around $120 million.

Expansion overseas | The company has acquired land overseas for another park, which is where most of the future growth will come from.

The stock is currently priced in the $8 region, a bit pricey based on other stocks in the market but time will allow the valuation of others to catch up with Dolphin.

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

FX rate change hits Kingston Profits

May 16, 2013 by

Kingston Properties is reporting lower profits in the March quarter this year compared to last year. Not only are profits lower, there was a significant hit from financing costs, caused by foreign exchange losses on loans denominated in US dollars due to slippage of the Jamaican dollar during the quarter. The company reported a loss of $10.8 million before foreign exchange loss and after a tax credit, the loss was down to $7.2 million. In the similar quarter last year the company reported a profit of $3.2 million before tax and $2.45 million after tax.  Other Comprehensive amounting to $22.5 million resulting from translation gain on the operations resulted in a positive picture at the end of the day ,with Comprehensive Income being $15.44 million. In 2012, the company reported Comprehensive Income of $6.2 million.

Income | Rental revenue for the quarter was $21.86 million, a 14 percent move from $19.1 million in 2012 but operating expenses climbed by 44 percent, much faster than income to $14.8 million. Management states that indirect property expenses accounted for approximately $2.9 million of the $4.5 million increase in overall operating expenses, with the major contributors being repairs and maintenance, home owners’ association fees and property taxes.

Group finance costs were $19.6 million for the quarter compared with $7.4 Million for the similar period in 2012.These amounts include unrealized losses of $14.3 million and $2.5 million respectively, due to foreign currency translation losses resulting from the devaluation of the Jamaican dollar.

KingstonProperitesREIT_logo130X140At the end of the quarter, Investment Properties were $850 million, an increase of $641.4 million over the 2012 first quarter. Fair value gains of $166.3 million on the Red Hills Road property and positive currency impact of $30.3 million on the Miami residential condominiums, accounted for the increase in property values. 

Cash and equivalent amounted to $200 million of which $168.1 million is restricted amounts.

Assets & Loans Concerns | Group liabilities were $350.3 million at the end of March, including current and long term loans payable of $325 million of which $186 million in payable within twelve months. Although the company has enough cash to meet this year’s pay out, the real concern is that the amounts to be paid over the life of all the loans is, in the short run, not being supported by cash flow. The quarterly report did not address this issue.

Funding options | In its annual report to shareholders, the company stated that they have a number of options to raise funds, these include:

  • Convertible bond, with incentives for holders to convert to equity
  • Secured bond with first claim on the property
  • Equity capital; preferred, common
  • Other types of instruments based on investor preferences and objectives

Property holdings | Kingston Properties holds a portfolio of 89,957 square feet of property consisting of a fully tenanted office/warehouse building of approximately 26,000 square feet located on Hagley Park Road in Kingston, Jamaica and 19 condominium apartments in downtown Miami.

The company discloses that it has been evaluating doing transactions in the affordable segment of the local residential market with the goal of  providing a housing solution for the large group of buyers with steady income who are looking for units priced below $7 million. Finished homes will be in the range of 800 square feet at a minimum, allowing most home buyers a comfortable unit size without the immediate desire for expansion.

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

Cargo Handlers profits up 38%

May 16, 2013 by

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: ,

Big jump in H&L profits but small sum

May 16, 2013 by

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.

HardwareLumber_Bldg150x150While 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: ,

Honey Bun not so sweet in Q1

May 15, 2013 by

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: ,