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.
The 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.”
[…] growth in profit in the second quarter, a continuation of increased profits experienced in the first quarter of the year. The strong growth is as a result of robust revenue growth in both quarters of the year. Revenue […]