Solid performance for Lasco Manufacturing

Lasco Manufacturing reported second quarter results, with a 13 percent rise in revenues to $4.65 billion for the half year and 3 percent for the quarter to $2.34 billion from $2.28 billion in 2020.
Profit rose 6 percent to $782 million from $737 million in 2020, after tax charge more than doubled to $327 from $145 million in 2020. Profit after tax dipped 4 percent in the September quarter, to $380 million from $396 million in 2020 as increased taxation grew faster than the rise in profit even as pretax profit rose 12 percent to $554 million from $492 million in 2020.

Lasco’s ICool drinks.

Gross profit margin slipped in the first half of the year and the September quarter to 37 percent from 39 percent in 2020, as input costs climbed faster than revenues by 5 percent to $1.469 billion, in the quarter compared to 16.8 percent for the year to date period, to $2.948 billion. The effect, operating profit slipped just 2.3 percent in the quarter to $870 million from $881 million but rose 6.8 percent for the year to date, to $1.7 billion from $1.6 billion in 2020. According to the Managing Director, James Rawle, in his report accompanying the quarterly, “margins will therefore be under pressure and while further price increases may become necessary, we are committed to mitigate the extent through our drive for improved efficiencies cost control and internal economies.”
Operating expenses declined 11 percent to $319 million in the quarter and slipped 7 percent in the half year to $623 million. Finance cost dipped in the quarter to $13 million, from $16 million in 2020 and $32 million to $29 million for the six months.
Cash inflows brought in $2.28 billion gross, but growth in working capital, addition to fixed assets, loan and dividend payment resulted in a cash flow deficit of $415 million and reduced cash funds from $1.86 billion from the end of March this year.

Lasco’s products

Current assets closed the period at $6 billion, including trade and other receivables of $3 billion, cash and bank balances of $1.44 billion. Current liabilities ended the period at $1.79 billion. Net current assets ended at $4.3 billion. At the end of September, shareholders’ equity stood at $8.4 billion, long term borrowings at $125 million and short term loans at $455 million.
Earnings per share for the quarter was 9 cents and 19 cents for the year to date. IC forecasts 45 cents per share for the fiscal year and 60 cents for the following one. The stock traded at $4.50 on the Jamaica Stock Exchange Junior Market, with a PE ratio of 10 times the current year’s earnings and the stock should trade between $10-12 by the end of 2022 if the earnings are achieved and interest rates remain close to present levels.
The stock is undervalued with the price at a 26 percent discount to the market average and half that for a number of stocks. It possesses good management, is building up cash at a fast pace that can be used for increased dividends or expansion of existing plant or acquisitions and will be debt free shortly.
The company paid a dividend of $300 million or 7.26 cents per share in 2021 versus 6 cents in 2020. Net asset value per share is $2.04, with the stock selling at 2.2 times book value.

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