Jamaica Producers (JP) sold their headquarters but retained occupancy. Big corporations don’t usually do that. Reasons have been given that the proceeds will be used in other developments but the truth seems to lie elsewhere. The real story seems to lie buried in the group’s balance sheet and the cash flow statement.
Borrowings have gone up considerably to $2.15 billion from $1.18 billion at the end of June 2014, not something the group is known for in the past.
The real story shows up in the cash flow statement. Cash generated from operations was negative $340 million for the half-year and possible $700 million for the full year, with loan repayments to be made and cash and investments which are down from what use to obtain in pass years, with $730 million at the end of June this year. Producers needed to shore up the cash position and may need to do so again before too long. The company’s investment in associated companies and Joint Ventures is the area generating most profit. Management has less direct control over cash generated by these entities and profits booked may only realise a very small cash return.
The group reported earnings for the second quarter attributable to shareholders of $414 million but the bulk of that, $319 million, came from gain on sale of fixed assets. For the year to June, net profit attributable to JP shareholders was $589 million compared to $138 million in 2014 of which $429 million came from gains on disposal of fixed assets and investments.
Excluding the one off gain, profit in the June quarter from ongoing operations would be on par with the $104 million generated in 2014 quarter. The core business is not delivering much in terms of profit, with $28 million in the June quarter, down from $63 million in 2014 and just $41 million for the half year versus $43 million in 2014. Expenses have been held tight with just an $8 million increase in the quarter and $30 million increase in the half year. In the Chairman’s report to shareholders, Charles Johnston stated that “Year-to-date revenues for 2015 were down by 6 percent. This was primarily a result of the depreciation of the euro relative to the Jamaican dollar by 14 percent compared to the comparable six months period in the prior year. The major share of our revenues is denominated in euros and our European juice business is the largest contributor to the Group’s revenues. Offsetting these changes has been significant local currency revenue growth in several of our other businesses”.
Take that has a given, but end in 2014, the net results before associate and joint ventures income was just $63 million for the quarter and $42 million for the half year, not earth shattering considering revenues of more than $4 billion for the half year.
Share of profit in associated companies and joint ventures delivered increased results of $172 up from $99 million for 2015 and 2014 quarters, respectively and for the half year $274 million and $167 million partly due to increase shareholdings in Kingston Wharves.
JP management has been hard at work to radically change the group, based on results for the past few years it isn’t easy, although there are now clear enough signs that things are coming together. Producers stock is no longer the darling of investors the way it was in the 1990s and will need to rev up profit and grow at a good clip.