Profit jumps at CPJ but watch 2023

Two Fridays ago, investors snapped up 1,258,697 shares, 12 times the average Caribbean Producers shares traded since mid-September, but the price pulled back to $12.50 at the close of the first Friday’s trading in response to the company reporting record earnings of US$7.5 million after corporation tax of $1.744 million in delivering J$1.05 per share for the year to June, more than 50 percent over the US$5.24 million made in 2018, with no tax then payable, the previous best year.

Caribbean Producers traded 52 weeks’ high during the week following a near US$2 quarterly profit.

The company reported a loss of US$2.3 million in 2021, resulting in lower revenues as the hotel sector they sell to primarily operated at low levels after closure in 2020 due to Covid-19.
Sale revenues climbed 209 percent for the year, to $120 million from just $57 billion in 2021. The 2022 final quarter produced revenues that were 58 percent higher than in 2021, coming out at US$33.5 million and delivering a pretax profit of US$1.5 million, with the gross margin down to just 22 percent in the quarter. Inventory written down accounted for US$1.1 million in the June quarter, down from US$1.37 million in 2021, with the company posting revenues of US$21 million and profit of US$1.3 million.
The 2022 results were delivered, with tourism traffic at just 78 percent of 2019 for the 12 months to June this year, with the final quarter benefiting from tourist traffic just 3 percent less than in 2019.
Profit margins increased from a low of 24 percent in 2019 to 30 percent in 2022 and are up from 25 percent in 2021 and 27 percent in 2020, leading to gross profit rising to $34.8 million in 2022 from $14.74 million in 2021 and $20.7 in 2020.
Segment results show the Jamaican operation enjoying a 96 percent increase in revenues to third parties of $97.5 million, up from $46.9 million in 2021 and contributed segment results of $7.4 million, up from a loss of $2 million in the previous year, while profit for the St Lucian operations increased to $436,000 million from a loss of $522,000 in 2021, with revenues rising 103 percent to $23.45 million, from $11.56 million in the prior year.
Selling and administrative expenses rose 50 percent to $18.2 million for the year from $12.1 million in 2021, but depreciation remained nearly flat at $4.2 million from $4.19 million in 2021. Finance cost jumped 34 percent to $2.95 million from $2.2 million in 2021.
Gross cash flow brought in $13.5 million, but growth in receivables, inventories and addition to fixed assets offset by increased payables more than wiped out the inflows leaving a deficit of $3 million that was funded by net borrowings of $3.5 million.
At the end of June, shareholders’ equity stood at $23 million, Long term borrowings ended at $15.7 million and short term at $26.7 million. Current assets accounted for $62.6 million, including trade and other receivables of $8.4 million, inventories at $40 million, almost twice the level in 2021 and cash and bank balances of $4 million. Current liabilities amounted to $46.8 million. Net current assets ended the period at $16 million.
At the end of July this year, the company issued $13 million of Unsecured Fixed Rate US$ notes, with a tenor of five (5) years and during the continuance of an Event of Default bear interest at 10% per annum and at all other times 7% per annum. The monies received were used to repay existing related party loans at varying interest rates. forecasts J$2.75 per share for the fiscal year ending June 2023, with a PE of 5 times the current year’s earnings based on the price of $13.93 the stock traded at on the Jamaica Stock Exchange Main Market, with a price target of more than $40 in 2023.

Not mentioned in comments from the company is the outcome of discussions they were to have regarding an acquisition in the Easter Caribbean and the raising of fresh equity capital to help fund the acquisition and reduce the heavy debt load.

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