CPJ’s big jump in profits

With net profit for the last quarter of US$1.4 million from revenues of US$19.2 million, Caribbean Producers Jamaica (CPJ)‘s June profit surpassed the previous quarter’s results by 188 percent. As a result, Earnings per Stock increased to US.13 cents compared to US.4 cents the previous year.

Management stated their release that fourth quarter performed ahead of the company’s expectations in terms of projected sales thereby contributing to the significant increase in net profit. Revenue was up 9 percent in the quarter from US$17.7 million in the corresponding period last year. This, management said, “was the result of increased production and efficiency of the manufacturing division, the consumer support of CPJ Market Kingston and Cru Bar. In addition, the hotel sector remained buoyant during the quarter as high occupancies were enjoyed throughout the period notwithstanding the closure of major hotel properties.” The growth in revenues of 9 percent for the quarter is in contrast with of just 2.7 percent for the year.

The company reported achieving a 15 percent increase on Gross Operating Profit of US$5.4 million, a significant improvement when compared to the corresponding period last year of US$4.6 million representing 28 percent and 26.4 percent gross profit margins respectively for the last quarter.

In spite of the big jump in the quarterly profit, net profit for year increased by just 5 percent to US$3.2 million compared to US$3.04 million at June 2012. Earnings per stock unit moved to USD 0.29 cents. The profit was realised from revenues for the year of US$69.4 million versus US$67.5 million over the corresponding period last year, an increase of US$1.9 million or 2.7 percent. For the year, gross profit increased from US$17.4 million to US$19.9 million as operating cost fell from US$50 million to US$49.5 million. Regardless, it is the results of the June quarter that is of most import as it points the way forward for profits.

CPJ reports its results in US dollars, as such exchange rate changes are not readily visible but some of the increased profits in the quarter would be due to lower cost of some local inputs making the result for the quarter larger than normal. That may well be true but sales in the period actually rose in real terms thus giving a good glimpse of possibly strong growth in the profits for 2014. The number suggests that the 2014 earnings per share should be in US$0.50 range as they ramp up sales form the manufacturing operations.

Selling and administrative expenses increased by 16 percent for the year to US$13.47 million from US$11.6 million and interest cost rose nearly 17 percent to US$1.8 million. The depreciation charge of US$1.5 million increased by US$469 thousand or 42 percent compared to US$1.1 million in the corresponding period in 2012 representing the capital expenditure for the manufacturing and operational assets set up this year.

Too much debt | At the end of June, shareholder’s equity stood at US$13 million but borrowings was at $24.8 billion, which is far too risky. Current assets that stand at US$32 million including US$3 million in cash is well in excess of current liabilities of $15 million, but short term loans amounts to over US$9 million. Cash flow for the past year came in at US$5 million and this should climb in the new year if the last quarter numbers are indicative of the 2o14 fiscal results.

Insider call | The company seems to be benefiting from the expansion that it undertook after the initial public offer (IPO) and the promise of strong profits that investors gleaned at the time of the offer does exist. IC Insider considers this stock as Buy Rated but is concerned about the high debt load, which is well beyond acceptable levels.

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