Desnoes & Geddes brewers of the world renowned Red Stripe Beer, reported impressive results for the year to June 2014, with pretax profit jumping 96 percent, including a gain on sale of shares, in two overseas breweries in the Caribbean. Excluding this one off gain, profit before tax would have been up by a still respectable 45 percent to $2.7 billion, instead of the $3.68 billion reported.
Profit after tax ended at $3.15 billion, but excluding the gain from the shares, it would have been $2.2 billion or 80 percent up, instead of the 160 percent increase the net result shows. Net profit benefited from a reduction in the tax rate from 30 percent in 2013 to 25 percent in 2014, in addition, other income that was negative in 2013 at $130 million, was a positive $232 million in 2014, a swing of $360 million. Profit before tax amounted $928 million for the June quarter versus just $371 million in June 2013 quarter and after tax credit, $1 billion, compared with only $161 million in 2013.
Gross profit margin improved slightly from 50.13 percent in 2013 to end at 50.38 in 2014. In 2012 gross profit margin was at 44.86 percent. The 2014 performance is still well off the 60 percent achieved in 2006. During the 2014 financial year staff cost was cut due to redundancies, from $2.25 billion in 2013 to $1.74 billion for 2014, a reduction of $500 million, in addition the company spent $311 million in making staff redundant in 2013. These two items resulted in more than $800 million cost reduction in 2014 versus 2013.
Revenue for the year climbed 10.6 percent to $14 billion and in the final quarter it grew by a stronger 17 percent, to $3.84 billion, from $3.3 billion in 2013. Foreign sales declined by 7 percent for the year to June, to end at $1.8 billion while local sales climbed 13.75 percent to $12.3 billion. The US market declined the most, falling from $566 million to $300 million. Royalties earned declined during the year to $525 million, from $556 million.
While earnings per share in the audited accounts is $1.12, earnings from ongoing operations is 77.6 cents for 2014. IC Insider forecast earnings of 90 cents per share for the current year ending June 2015, with the stock price under $5, the potential exists for investors to make a nice capital gain down the road and collect tidy dividend payments while they wait.
D&G has embarked on a brewery consolidation “project which will configure the brewery and process layout to ensure more cost effective production. By closing down the cellars and moving from horizontal to vertical processing vessels, we will reduce operating cost” management said in a report to shareholders. The company in April commissioned a combined heat and power plant which is expected to reduce energy cost.
At year end cash funds stood at $1.79 billion, current assets amounted to $4.6 billion and current liabilities at $2.6 billion, there were no loans on the books as of June.
The stock which was placed on the Buy Rated list months ago, remains there.