Shrinking margins and lower gross profit could not prevent Seprod from enjoying a bump in profit of $312 million in the June quarter versus $161 million in 2012 and $542 million for the six months period versus $453 million in 2012.
Seprod got a boost of $107 million from the sales of equities in the June quarter. Also in the quarter, they benefitted from a gain of $54 million from holding of assets in foreign currency. Finance and other operating income rose to $112 million in the quarter, up from $80 million in 2012 and for the six months, $206 million versus $167 million. Management has kept selling and administration cost under control with both areas falling in the latest quarter and just rising slightly for the year to date period. Selling expenses which came out at $100 million for the quarter was $6 million less than in 2012 and admin cost came out at $372 million versus $374 million in 2012. For the six months, selling expenses climbed by $4 million to $198 million and admin went to $784 million up from $751 million in 2012. Finance cost moved up to $42 million from $26 million in the June quarter and in the six months period, it rose from $48 million in 2012 to $82 million in the latest period.
Revenues | Revenues were down 2 percent in the first quarter, falling to $3.7 billion and off by $74 million from the year ago period. However, revenues increased by a healthy 17 percent to $3.7 billion in the June quarter and is up 7 percent for the 6 months to June.
The biggest issue the company is currently having is a sharp fall in profit margin. To June 2012, gross profit as a percentage of direct cost was 28.2 percent and has fallen to 24 percent for the 6 months to June this year and to only 21 percent versus 24 percent in the June quarter. The deterioration has occurred in the distribution segment as profit stagnated at $99 million, a slight 3 percent rise in that area while sales rose 11.5 percent. In the manufacturing segment, profit is up by 12.5 percent to $893 million and revenues is up 3.5 percent to $4.7 billion.
Earnings per share for the 6 month period is $1.05 and the full 12 months to December should be around $1.80-$2.
Finances | Seprod has $3.9 billion in cash and investments. Borrowing is at $2.26 billion up a billion dollars from June 2012. Current assets are well in excess of current liabilities by 3 to 1 and equity stands at a strong $9.6 billion.
Longer term | Seprod has never been one of those sexy companies but it has done remarkably well since listing back in the 1990s. It appears that for 2014 and beyond a lot is being predicated on the fortunes of the sugar operations in St Thomas where the target for sugar production is the processing of 300,000 tonnes of canes that should work out to around 25,000 tonnes of sugar. Management indicates that the expanded canes farms are already planted and the production should be coming in the 2014 crop. The group acquired Bowden Estates with 3,000 acres along with another property in the area and lands that were in bananas have now been planted out in canes. Management states that the sugar company is critical to them as a foreign exchange earner that can supply foreign currencies for the group when needed.
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[…] Seprod reported a hike in profit of 14 percent for the six months to June this year, slower than the 34 percent increase in the first quarter. The company posted profit of $698 million for the half year, up from $614 million in 2013 and $298 million in the quarter versus $317 million in the 2013 quarter. Seprod, involved in the manufacturing and processing of food products, oils, sugar, milk as well as a food product distribution business, enjoyed an 8 percent rise in revenues to $8 billion from $7.4 billion and 12 percent to $4.17 billion in the second quarter from $3.7 billion in the 2013 June quarter. While revenues climbed, Seprod suffered a reversal in the positive gains in investment income in 2013 with a fall of $110 million in the quarter and $118 million in the half year. Gross profit grew a very strong 53 percent in the June quarter and a much lower 32.8 percent for the six months over the same period in 2013. Gross profit margins climbed to 29.70 percent in the June 2014 quarter, up from only 18.8 percent in 2013, for the six months 29.7 percent and 22.7 percent, respectively. These are good signs of an improving performance of the group. A major part of the improved performance, is the contribution the sugar manufacturing segment made. Segment results show operating profit for the half year rising 61 percent, against revenues climbing only 11.4 percent, Distribution segment’s operating profit, fell from $99 million to $68 million. The group’s sugar operations made a loss of $15 million in the June quarter for the group net of minority interest and $30 million for the six months, a big improvement over the $166 million lost for the June quarter last year, and $200 million for the six months to June, 2013. The group is now in the last six months of the year, when little income will be generated from the sugar operation at Golden Grove Sugar Factory in St Thomas. The cost associated with this operation will be absorbed and will dent profits in other areas. For the second half of 2013 the group picked up $322 million in losses from the sugar operation. Much progress has been made in reducing losses in the sugar operation but there is still some way to go to move to a profitable business. A lot will depend on increasing significantly, the amount of canes to be milled by the factory and by extension the sugar to be produced. They now need to produce around 3,000 to 4,000 tonnes more sugar, to break even. Expenses| Selling expenses rose sharply by 43 percent in the quarter to $142 million compared with $100 million in 2013 and 22 percent for the six months to $241 million from $198 million. Administrative cost rose 25 percent to $428 million in the quarter versus $373 million in 2013. For the six months period, it rose only 7 percent from $784 million to $839 million. Finances| Seprod has $4 billion in cash and investments. Borrowing stood at $2.55 billion up from $2.26 billion at June 2013, current assets are well in excess of current liabilities by more than 2 to 1 and equity stands at a strong $10 billion. Longer term| For 2015 and beyond, a lot is predicated on the fortunes of the sugar operations in St Thomas, where the target is for the processing of 300,000 tonnes of canes and to produce around 25,000 tonnes of sugar. In 2013, Management indicated that the cane farms are already planted and increased production should be coming in from the 2014 crop. For the 2014 crop the factory, reached its highest-ever production levels, with 19,300 tonnes of sugar. the group produced profits of $907 million last year and is expected to better this in 2014 by some. The stock remains buy rated. […]