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.
Lasco shares sell & buy FX or hold
Our response back then, thanks for your enquiry. As you will see our BUY RATED list contains these three stocks. Here are our views. First off the local stock market tends to go down around May until last June or July. This is not cast in stone, just a tendency. One reason for it is that investors get the full information as to what companies did last fiscal year and a glimpse for the new-year. In the case of the three Lasco companies they have just reported their full year results. The distributorship earning is the most encouraging of the three and looks like it will probably do better than the other three in the short to medium term. It will also benefit from the Salada Foods distribution which started this year, as well as from increased production to come from the expanded Lasco Manufacturing Company’s operation. The information suggest that the next set of results should possibly show growth over that of 2013.
Lasco Financial seems poised for good things but big marketing spend last fiscal year kept profits down as they went for more market share. It does look as if they will be spending on the world cup promotions which could build business, but may also keep profits pressured somewhat for a while.
Lasco Manufacturing seems cheap at $1 bearing in mind the impact that the factory expansion is likely to have on both sales and profits ultimately. Short term they will have to pick up interest cost and depreciation on the completed factory but will enjoy cost savings and ultimately increased profits.
It is my view that the market overall, is undervalued but investors will need to be patient and the payoff is likely to huge for those who wait, the gains to be reaped elsewhere is not likely to be all that great, to cause one to jump and possibly miss the gains in the local market that is ahead.