Kremi ekes out small profit

Caribbean Cream reported revenues of $646 million for the August quarter this year versus $645 million in 2022, with the year to date revenues slipping to $1.25 billion from $1.257 billion in the previous year. Profit fell to $3.6 million in the August quarter from $7 million in 2022 and rose to $10 million for the six months from $8.5 million in 2022.

Caribbean Cream Kingston outlet

Improvement in production cost pushed gross profit up 10 percent to $390 million for the half year versus $354 million in 2022 and $205 million for the quarter to August this year, up 8.5 percent from $189 million in 2022. Cost savings were only realised in some areas as administrative expenses and finance costs climbed over 2022. Administrative expenses increased 6 percent to $158 million from $149 million, with finance costs climbing 60 percent to $24 million, from $15 million in the August 2022 quarter. For the half year, administrative costs rose 7 percent to $306 million from $286 million the previous year, while finance costs jumped 56 percent from $27 million to $42 million for the half year.

Finance cost associated with the expansion of the warehouse and building out of the cogeneration energy plant is being written off directly as a current expense rather than capitalising it, with the equipment as such, the reported profit over the past three years appears understated as a result of the treatment of this item. Accordingly, the 2023 full year’s profit should be closer to $70 to $80 million than the above figure, and the 2023 half year’s figure should be around $37 million.
Operations generated Gross cash flow of $77 million, growth in working capital and $206 million spent in addition to fixed assets offset by loan inflows net of outflows of $238 million, resulting in funds growing by $78 million during the six months.
Considerable sums have been spent on plant and machinery to improve efficiency and, by extension, increase profit. Accordingly, $439 million was expended over the past year, bringing the gross amount in fixed assets to $2.7 billion from $1.7 billion at the end of February 2022. Most of the new expenditure went into equipping a new cold storage plant that has expanded freezing and cold storage capacity, with some spent on the cogeneration energy plant, which is intended to cut energy costs.
The company remains financially healthy, with current assets of $539 million, including trade and other receivables of $114 million, cash and bank balances of $145 million and inventories of $248 million, up from $183 million in August 2022. Current liabilities ended at $225 million and net current assets at $314 million.
At the end of August, shareholders’ equity amounts to $836 million, a rise from $807 million at the end of August 2022, with long term borrowings at $1.2 billion and short term loans at $43 million.
Earnings per share for the quarter was one cent and 3 cents for the year to date. IC Insider.com computation projects earnings of 55 cents per share for the fiscal year ending February 2024, with a PE of 7 times current year’s earnings based on the price of $3.95 the stock traded at on the Jamaica Stock Exchange Junior Market on Friday. The PE ratio compared with a market average of 10.7. Net asset value ended the period at $2.21, with the stock selling at just under two times book value.
The company has a checkered profit history, as shown by the attached chart of profits, since 2015 and has struggled with increased costs since the disruption caused by COVID-19. The situation is worsened by the treatment of interest incurred to finance the new warehouse.