It was difficult to understand the factors driving a pile of investors into Salada Foods shares after the stock split at prices as high as $10, even after the second quarter results were posted, showing strong increases for revenues and profits in that quarter.
Alert investors would have found that the big jump in the second quarter’s performance was due to the underperformance in the first quarter. Unfortunately, the company directors did not help investors to understand what was going on. Many investors will learn that when companies’ products are sold through distributors, sales can be jerky for the producers while the distributors can be showing a totally different picture. That seems to be what happened at Salada, where the second quarter sales fill the void left in the December quarter when sales were low.
The latest quarterly report has leveled the playing field and many investors are going to weep for not heeding the suggestion that the stock was highly overvalued.
Sales in the third quarter popped 17 percent to $311 million, from $257 million in 2020. For the nine months to June, sales rose just 9 percent to $890 million from $920 million in 2020.
Profit after tax climbed 53 percent to $51 million for the current year’s June quarter compared to $24 million in 2020 and for the nine months this year, it rose an impressive 225 percent to $115 million from a mere $36 million in 2020.
Gross profit margin rose in the June quarter to 32.97 percent, with the year to date ending at 30.4 percent as gross profit rose 29 percent in the quarter to $102 million from $79 million 17 percent for the year to date, to $271 million from $231 million in 2020.
Coffee plant
Administrative expenses varied marginally than in the prior year, ending at $31.2 million in the quarter from $30.3 million in 2020 and slipping in the nine months to $96.7 million from $897.5 million in 2020. Marketing and sales expenses were effectively flat at $13 5 million versus $13.4 million in the 2020 June quarter and down sharply in the nine months to $36 million from $46.7 million last year. Net finance income saw a positive contribution in the June 2021 quarter of $8.6 million compared to a loss of $3.6 million in 2020 and $15 million in the nine months to June of $15 million from a loss of $12.5 million in 2020. Taxation rose to $16 million in the June 2021 quarter from $6 million last year and $38.5 million in the nine months to June this year from $12.5 million in 2020.
Gross cash flow brought in $174 million, but increased investments and additions to fixed assets and the paying of $108 million in dividends resulted in net outflows of $4 million. At the end of June, Current assets amounted to $964 million, with inventories of $487 million, receivables of $159 million, cash and bank balances of $167 million and investments of $151 million.
Current liabilities ended the period at $256 million. Net current assets closed the period at $707 million while shareholders’ equity stood at $964 million with no long borrowed funds used to finance the operations. In addition to investments in current assets, is $105 million classified under non-current assets.
Earnings per share came out at 5 cents for the quarter and 11 cents for the year to date. IC Insider.com is forecasting 17 cents per share for the fiscal year with a PE of 46 times, current year’s earnings.
The stock traded at $7.79 on the Main Market of the Jamaica Stock Exchange. Net asset value is 93 cents, with the stock selling at 8.6 times book value.
