Lasco Manufacturing is now embarking on a new and expanded phase for their operation, now that the new plant is complete and commissioning is commencing for both the machinery and for new products.
Prior to the expansion kicking in the company saw revenues jumped 28 percent in the June quarter to $1.08 billion. Profits just about kept ahead of the results for 2013, in coming in at $141 million, a 2 percent increase. Gross profit climbed by 26 percent to $315 million from $250 million in 2013, but gross profit margin slipped slightly, from 42.2 percent to 41.3 percent. Operating expenses jumped, 29 percent to $143 million and finance cost was up to $32 million versus almost none in 2013. The bulk of the increased sales, Chairman Lascelles Chin states is from increased production of powder products, with most going into exports.
“Net Profit was impacted by temporary increase in manufacturing cost due to increased staff complement, increased overheads costs associated with the new manufacturing plant as well as increased finance and marketing cost. It was expected that these increases in operating costs would affect the bottom line. We are therefore pleased to report that the Net Profit for the quarter surpassed expectations. The company made significant marketing investment during the period in preparation for the launch of new product lines. This venture involved sponsorship of the FIFA World Cup broadcast. We have completed the construction of the dry blend beverage plant and we are in the process of commissioning the machinery and equipment. Lasco Manufacturing successfully completed construction and commissioning of the equipment for the liquid beverage plant. The plant has now commenced production,” Eileen Chin, Managing Director reported to shareholders with the release of the quarterly report. Las Chin indicated that the production of the liquid plant has just started properly, as some kinks in the system had to be worked out.
Lasco is yet to face the full impact of depreciation charge against profit form the expansion of the plant and factory as the bulk of the expansion cost, remained in work in progress at June on which no depreciation is chargeable until it is transferred to fixed asset. When these amounts are transferred to fixed assets then they be subject to depreciation, which could end up around $100 million per annum as additional charge.
Lasco fixed assets climbed to $3 billion with an increase of $800 million over the position at June 2013 and borrowed funds to $1.5 billion from $1.1 billion at the end of June last year. Accounts receivable rose from to $846 million from $641 million at June 2013. Trade payables declined by $100 million to $235 million.
The first quarter numbers are positive indicator about the future growth of the company. The only question is what will be the appropriate time to buy into the stock to ride what is likely to be an inevitable ride to much higher levels later on.
New expanded production phase at Lasco Manufacturing
Finance cost shocks JPS
Jamaica Public Service Company profit got a shock for the June quarter when a 21 percent increase in finance cost drove total cost for the quarter in this area to US$18 million from US$15 million in 2013.
For the six months to June, finance cost was flat with the prior year at nearly US$33 million for each period. The company, the sole distributor of power to end users in the country, reported only US$1.7 million in after tax profit for the quarter and US$8.9 for the six months to June. In 2013 the second quarter profit was US$1.6 million and the six months US$2.4 million.
Revenues generated in the periods to produce those results are US$270 million versus $268 million in 2013 for the quarter and US$533 million in the six months and for 2013, US$539 million. Although the revenues varied, a more important measure is gross profit which are net of the impact of fuel and the charge for the purchase of power from private power plants. The sales net of fuel and the purchases of power came out at US$67.2 million in the June quarter compared with US$62.9 million in 2013 and US$137 million for the six months and US$133.5 in 2013. The return on equity is only around 5.4 percent for the year well below the allowed rate of 16 percent by the regulators, but the impact of devaluation charge due to the accounting in US dollar rather than Jamaican dollars negatively affected the returns.
Ironically, while JPS records its financials in United Sates dollars, the company suffered a devaluation loss of US$7.4 million in the quarter and US$12.5 million for the six months. Without the foreign exchange losses return on equity would have been much greater than the above stated figure.
“JPS currently has approximately 606,654 customers who are served by a workforce of approximately 1,690 employees. The Company owns and operates: 4 power stations, 9 hydroelectric plants, 43 substations and approximately 14,000 kilometres of distribution and transmission lines,” the company stated in its annual report for 2013.
JPS That has equity of US$337 million also has debt of US$418 million as of March.
Strong growth still evident at Access
The public may get the impression that the dispute at the directorship level, may be affecting Access Financial Services badly, that is not showing in the profit numbers to date. 
On the surface, it may appear that a profit increase of only 13 percent, in the June quarter could be a by-product of the dispute, considering the robust 30 percent increase in profit in the March quarter, but that would be a wrong conclusion. Revenues grew 35 percent in the second quarter, to reach $267 million. Revenues grew from of $198 million for June 2013 and from $254 million in the 2014 March quarter. For the six months to June, revenues climbed 40 percent to $521 million up from $371 million in 2013, continuing its strong growth trajectory since the shares were listed in 2010. The revenue growth, was fueled primarily from interest on loans that climbed to $473 million from $347 million in 2013.
A $50 million increased provision for bad loans to $75 million, for the June quarter versus last year June quarter, was the major reason for the slower profit increase, in the quarter.
Access is still set to deliver around $1.50 earnings per share, for the current year. With equity of $750 million, the company is likely to enjoy a very strong 50 percent return on equity for the current year. The stock last traded at $8.97 but had a bid of $9.15, to buy a small quantity of the company’s stock. The stock is tightly held and is difficult to get at times. The company just declared a dividend of 36.5 cents per share payable to shareholders on September 1st.
Loans on the books at June is at $1.1 billion, a major jump from the $776 million at June 2013. Total borrowed funds used in the financing of the business, amount to $542 million compared to $360 million in June last year, with cash at $87 million.
Grace’s 21% profit gain obscures pressures
Grace reports a 21 percent increase in profit for the six months to June, this year, but the net result obscures pressures in many of the divisions within the sprawling group and mainly a reduction in the tax rate to 25 percent from 30 percent last year beefed up the bottom-line.
A 15 percent increase in second quarter revenues bettered the 12 percent increase in the first quarter this year, helping to produce pretax profit of $1.3 billion in the second quarter for an increase of 8.6 percent over 2013, down from 12 percent increase, in the first quarter. For the six months, pretax profit amounted to $2.58 billion versus $2.33 billion in 2013. Profit after tax is up 20 percent for the June quarter to $845 million compared with $703 million in 2013, and for the six months, $1.68 billion or 21 percent ahead of 2013. Earnings per share of $5.07 for the half year, seems set to end up around $11 per share for the year, from ongoing earnings.
Operating profit| Operating profit margin before other income slipped in the latest quarter to 4.34 percent down from 4.97 percent in 2013, for the year to date its 4.5 percent, the same as in the previous year. The reduced margin in the second quarter may not seem like much but it helped in ensuring that operating profit before other income was only up less than 1 percent compared with the revenue increase of 12 percent.
Return on equity is working out at around 11 percent, which is not high by Jamaican standards, and is indicative that management has a lot of work to do, to get it up to more acceptable levels.
Revenues| For the second quarter, revenues came in at $19.7 billion, better than the $18.8 billion generated in the first quarter. For the year to date revenues are up to $38.5 billion or 14 percent over that of 2013. The bulk of the revenue increase came from the Food trading division with a 16.2 percent increase and money services of 18.7 percent, with the other divisions enjoying moderate increases at best but with most being flat.
Balance sheet| Grace’s balance sheet shrunk, with the sale of the investment arm to Proven Investments, they now boast total assets of $93.5 billion, down from $108.6 billion at December last year. Subsequent to the quarter, Grace announced the acquisition of a new subsidiary in the USA, La Fe Foods with revenues of US$80 million per annum or J$9 billion.
The company’s stock last traded at $56.50, at around 5 times earnings, providing upside potential when the local stock market gets going, for it to deliver decent gains for patient investors.
Cost jumps sharply dents Republic Bank’s profit
Republic Bank’s assets grew by 6 percent for the year to June fueled by loans amounting to $26.6 billion that grew by 8.5 percent to over the same period.
The growth in assets and loans did not translate to increased profit. In fact profit was only saved from falling, by a turnaround in the result of associated companies moving from a loss of $74 million to a small profit of $7 million in the quarter and from a loss of $70 million in the nine months to a profit of $34 million. Profit before associated company results is down from $489 million to $426 million for the latest quarter and for the nine months, $1.22 billion from $1.27 billion. Net profit due to the bank’s shareholders is $308 million in the June quarter, compared with $305 million in 2013 and for the nine months, $869 million compared with $858 million. The results compare favorably with Trinidad’s Scotia Bank that suffered a 17 percent decline in profits for the 3 months to April and 7.5 percent for the six months.
Expenses| Operating expenses rose 18 percent, to reach $454 million for the quarter and 24.5 percent for the nine months, well ahead of the gain in revenues which is flat in the latest quarter but up 10 percent for the nine months. Interestingly, operating cost increased by 6.6 percent in the first quarter of the financial year. In the March quarter, Republic made a provision of $185 million writing down the value of goodwill on its investments in Barbados, resulting in a 45 percent jump in in operating expenses for the quarter. Countering the write off was a gain of $210 million, from sale of Visa Shares in the March quarter. What is clear is that results for 2014 will be around the same level as in 2013 of $1.297 billion or $7.30 per share. Republic Bank’s stock last traded at $122 each at a PE of 17.8.
Jamaica’s trade deficit falls, March’s better
Jamaica enjoyed a reduction in its trade for the first four months of this year, compared with the same period in 2013. The trade deficit amounted to US$1.34 billion, down from US$1.46 billion in 2013.
The country imported goods valued at US$1.86 billion for the January to April 2014 period, a decrease of US$199 million or 9.7 percent and exported US$77 million or 12.9 percent less for the January to April 2014 period, representing a big improvement over the change to March. Total exports for the 4 months came in at S$521 million, down from US$598 million in the similar period in 2013.
For the three months to March this year, imports fell by US$281 million and exports were down US$111 million to US$358 million, down from US$469 million in the 2013.
Carreras pays out $9.09 in last 12 months
Carreras declared an interim dividend of $1.20 per stock unit, to be paid out of accumulated profits on September 4, to stockholders on the Register of Members as at August 18, 2014.The Ex-dividend date is August 14, 2014.
Carreras last declared a special capital cash distribution of $1.34 per stock unit to be paid on July 31. The latest approved dividend will bring the total payments the company made to shareholders since August last year, to $9.09 per share. Carreras traded today at $34.20.
Access Financial Services declared an interim dividend of 36.5 cents payable on September 1, to stockholders on record at August 18, 2014. The Ex-dividend date is August 14. Access last paid 31 cents per share on August 15, last year as dividend. Access last traded at $8.97.
Hardware & Lumber falters in Q2
Hardware & Lumber could not carry over the good results in the March quarter into their second quarter with revenue of $1.72 billion for the latest quarter to June, 1.4 percent lower than the same period last year, while gross margin fell to 22.7 percent from 26.2 percent, principally as a result of product mix the company reported.
Total revenue for the six months was $3.53 billion, an increase of 7.2 percent ahead of $3.29 billion achieved in the same period last year.
Continued improvements in other income, operating expenses and finance costs resulted in $28.5 million net profit for the quarter or $0.35 per stock unit, compared to last year’s $43 million or $0.54 per stock unit. Profit after tax for the six months was $69 million, or 29.6 percent more than the $53 million for the same period in 2013. Earnings per stock unit for the six months is $0.85, up from $0.66 for the comparative period in 2013.
“Total gross profit for the six-month period was $802 million compared to $866 million for the comparative period last year. The combined effect of variations in sales mix and higher product costs resulted in average gross margins of 22.7 percent, representing a 3.6 percent decline compared to the same period in the prior year. Profit from operations increased by 8.9 percent to $108 million, supported by an increase in other income,” Management stated.
Operating cost for the quarter was down to $377 million from $398 million in 2013 and for the six months, cost fell to $753 million from $398 million in 2013.
Borrowings fell from $453 million in June 2013 to $279 million, helping to reduce finance cost from $25 million down to $16 million for the six months. For the latest quarter finance cost was slashed from $12 million down to $7 million.
The results for the June quarter places a cloud over the prospects for the balance of the year with what could be tight economic conditions. It is quite possible that the robust performance in the March quarter may have taken sales from the second quarter.
Pan-Jamaican Investment Trust refinances
The first tranche payment of J$600 million due on a $2.5 billion secured notes obtained by Pan-Jamaican Investment Trust in 2012, became payable on maturity on July 22, 2014.
Pan Jamaican indicates in a release to the Jamaica Stock Exchange, that arrangements have been made to refinance the amount with effect from July 23, 2014 for a further two years.
The proceed from the notes was obtained when the company acquired additional shares in Sagicor Life Jamaica (now Sagicor Group) in 2012 for a consideration of $3,055,100,542. The original funds were obtained from a private placement with maturities ranging from 2 years to 5 years.
Jamaica Money Market Brokers raise US$20M
Jamaica Money Market Brokers raised US$20,000,000 through the issue and private placement of unsecured extendible notes denominated in United States dollars. The offer was only available to Jamaican residents.
The private placement offer closed on July 18, 2014 and will mature on July 18, 2016. Note holders have an option to either redeem their notes on the Maturity Date or extend the maturity of their notes to July 18, 2019. The interest rate on the original note is 6.75% fixed for two years and 7.75% on the Extended Notes.
JMMB made profit due to the group’s shareholders of $2.83 billion for the year ending March 2014 and had total equity of $18.3 billion.