Cost hurts Lasco Distributors’ profit

Lasco Distributors reported a 50 percent jump in profit after tax of $592 million, for the nine months to December last year, up from $197 million in 2014. Profit after taxation of $26 million for the quarter rose by 10.4 percent to $213 million over prior year.
Revenues for the nine months ended at $10.9 billion, 36 percent higher than in 2014 while revenues for the quarter were up 36.4 percent to S4 billion. Profit after taxation came in at $213 million and is up from $193 million in 2014, mainly driven by growth in new business.
Gross profit grew by only 20 percent for the quarter to $644 million and 23 percent for the year to December to $1.77 billion as profit margin declined. Gross profit margin slipped sharply from 19 percent in the December 2014 quarter to 16 percent in 2015 and for the nine months, gross margin ended at 16 percent from 18 percent in 2014.
Other operating income, inclusive commissions from principals and interest on investments generated $82.5 million, an increase of 19 percent compared to the prior year’s $69 million for the nine months and was up 47 percent for the quarter to $53 million.
Operating expenses incurred in the period were S1.2 billion, an increase of 10.7 percent. For the December quarter, operating cost climbed by a much higher 21 percent to reach $458 million reflecting inflationary increases as well as costs related to growth strategy for new principal lines of business.
Total assets at the end of the period stood at $7 billion, an increase of S2.5 billion or 54 percent over prior year. Growth was driven mainly by increased inventory of $950 million arising from new business lines and capital expenditure of $550 million relating to the warehouse expansion. Receivable balances grew by 25 percent over prior year to close at S2.7 billion, while Payable balances grew by 81 percent to $3.4 billion. Short term Investments, Cash and bank balances at the end of the period were $1.076 billion up from $600 million. Shareholders’ equity stood at S3.4 billion, or 26 percent growth and the return on equity for the nine-month period was 27 percent compared to 22 percent in the same period last year.
IC Insider’s forecast is for per share earnings of 27 cents after tax for the March 2015 fiscal year and 50 cents for 2016 from ongoing operations. The stock last traded at $5 on the junior market of Jamaica Stock Exchange, with a PE of 18.5 times 2016 earnings but 10 times 2017 estimated earnings. The likelihood of a large settlement for the claim against Pfizer could enhance the attractiveness of the stock.