Profits did not percolate at Salada as the company reported a loss in its 4th quarter with revenues from all sources falling sharply to $152 million from $183 million and from $716 million to $634 million for the year to September.
The decline comes after the company reported robust sales and profits in the first quarter of its fiscal year to December 2012. Sales were up 27.5 percent in the December 2012 quarter and may have been a major reason why Salada suffered declines in sales thereafter, as the trade seemed to have stocked up on supplies, thus cannibalising sales in subsequent periods.
Profit after tax fell to a loss of $7 million for the quarter versus a profit of $41.8 million in the last quarter of the 2012 fiscal year. For the full year, profit fell from $153.4 million to $108 million in 2013. Early in the 2013 calendar year, the company adjusted prices downwards to try and combat declining volumes.
The reduced performance was evident from early in the year as revenues fell and profits followed. In the March quarter, sales revenues were down by 15.6 percent and 19.6 percent in the June quarter but accelerated further to 24 percent in the September quarter for the main business, excluding sales for its new subsidiary, Mountain Peak, which started sales in the fourth quarter.
Interestingly, 2013 is the first year that revenues have been down since 2010, when revenues fell just over a percent, and the second year since 1997 when revenues fell 13 percent. Gross profit, which fell a sharp 31 percent in 2013 have hardly fallen year over year since 2003 except for a 16 percent decline in 2010 and a marginal decline in 2005. In the past year, gross profit margin fell to 56 percent from a high 86 percent in 2012. The gross profit levels have fluctuated over the years and 70 percent seems to be the range that the company has aimed for in recent years.
Cost rise | Compounding the issue is the start-up of the Roberts business lines, which contributed to the reduced profit. While revenues fell, spend on selling and promotion climbed by a third to $43.7 million and administrative cost edged up 6.4 percent. On the other hand, finance income nearly doubled from $17.28 to $34 million as gains from foreign currency contributed $20 million. Operating profit fell sharply to $91.4 million from $208 million in 2012. Expenses for 2013 includes cost for Mountain Peak without the full benefit of sales from that operation to fully cover cost. The new subsidiary contributed approximately $4 million in sales and contributed $17.5 million of losses to the year’s performance.
The cost of inventories utilised in production amounted to $391 million versus $386 million in 2012.
Finances | The company recently declared a dividend of 40 cents per share payable in December which will amount to $41.6 million payment and is likely to reduce the cash on hand at the end of the year of $196 million. Amount due from customers is down from $150 million in 2012 to $90 million at year end but inventories rose to $251 million from $217 million in 2012. The company has current liabilities of just $75 million compared to current assets of $539 million at the end of September and shareholders’ equity stands at $700 million.
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Images courtesy of www.saladafoodsja.com
[…] at September last year. Cash is now at $95 million and increase over September’s $75 million. Salada produces the Mountain Peak coffee but also manufactures and sells a variety of beverage based […]