Profit slips at Honey Bun but watch 2023

A four year run of increased profits ended for the Junior Market listed baking company, Honey Bun, for the 2022 fiscal year to September, as cost pressure negated an impressive 38 percent surge in sales. Still, the revenue growth pales in comparison to a 59 percent jump in raw material cost for the year, amongst other items reflecting major cost movements.
Gross profit margin fell from 48 percent over the last three years to 40 percent, but a combination of price adjustments and reduction in raw material cost should result in an improvement in the 2023 fiscal year. Raw materials accounted for 29 percent of sales in 2021 but surged to 37 percent in the latest year. Administrative expenses jumped 32 percent to $531 million from $402 million in 2021. Staff costs rose 33 percent to $662 million, which increased employment accounted for a portion as the number of employed persons climbed 7 percent from 219 to 235. Selling and distribution costs rose just 17 percent to $408 million from $348 million in the prior year. Depreciation jumped 25 percent to $91 million from $73 million, but finance cost was negligible at just over $3 million.
For the year, revenues rose to $2.95 billion from $2.15 billion in 2021 and delivered a profit of $203 million, down from $219 million after taxation of $51 million and $72 million, respectively and generated earnings per share of 43 cents versus 46 cents in 2021. ICInsider.com forecast is for earnings of $1 per share for the 2023 fiscal year and $1.85 for 2024.
Interest income and reversal of impairment credit losses contributed to $20 million to profits versus $14 million in 2021, while other operating income contributed $2.5 million, down from $4.8 million in 2021.
Cash flows from operations amount to $185 million, down from $304 million in 2021. For the latest fiscal year, $166 million was used to acquire fixed assets and $73 million was used to pay dividends, resulting in $57 million of funds brought forward from 2021 being used to fund the 2022 activities.
The company finances remain healthy, with shareholders’ equity at $1.16 billion while borrowings amount to just $72 million. Current assets ended at $699 million, with cash and equivalent at $347 million and current liabilities at $256 million.
The stock traded on the Junior Market of the Jamaica Stock Exchange at $7.78 at a PE of 7.8 based on the projected 2023 earnings and 18 times 2022 earnings compared with the market average of 12 currently.