Profits did not percolate at Salada as the company reported a loss in its 4th quarter with revenues from all sources falling sharply to $152 million from $183 million and from $716 million to $634 million for the year to September.

The decline comes after the company reported robust sales and profits in the first quarter of its fiscal year to December 2012. Sales were up 27.5 percent in the December 2012 quarter and may have been a major reason why Salada suffered declines in sales thereafter, as the trade seemed to have stocked up on supplies, thus cannibalising sales in subsequent periods.

Profit after tax fell to a loss of $7 million for the quarter versus a profit of $41.8 million in the last quarter of the 2012 fiscal year. For the full year, profit fell from $153.4 million to $108 million in 2013. Early in the 2013 calendar year, the company adjusted prices downwards to try and combat declining volumes.

The reduced performance was evident from early in the year as revenues fell and profits followed. In the March quarter, sales revenues were down by 15.6 percent and 19.6 percent in the June quarter but accelerated further to 24 percent in the September quarter for the main business, excluding sales for its new subsidiary, Mountain Peak, which started sales in the fourth quarter.

Interestingly, 2013 is the first year that revenues have been down since 2010, when revenues fell just over a percent, and the second year since 1997 when revenues fell 13 percent. Gross profit, which fell a sharp 31 percent in 2013 have hardly fallen year over year since 2003 except for a 16 percent decline in 2010 and a marginal decline in 2005. In the past year, gross profit margin fell to 56 percent from a high 86 percent in 2012. The gross profit levels have fluctuated over the years and 70 percent seems to be the range that the company has aimed for in recent years.

Cost rise | Compounding the issue is the start-up of the Roberts business lines, which contributed to the reduced profit. While revenues fell, spend on selling and promotion climbed by a third to $43.7 million and administrative cost edged up 6.4 percent. On the other hand, finance income nearly doubled from $17.28 to $34 million as gains from foreign currency contributed $20 million. Operating profit fell sharply to $91.4 million from $208 million in 2012. Expenses for 2013 includes cost for Mountain Peak without the full benefit of sales from that operation to fully cover cost. The new subsidiary contributed approximately $4 million in sales and contributed $17.5 million of losses to the year’s performance.

The cost of inventories utilised in production amounted to $391 million versus $386 million in 2012.

Finances | The company recently declared a dividend of 40 cents per share payable in December which will amount to $41.6 million payment and is likely to reduce the cash on hand at the end of the year of $196 million. Amount due from customers is down from $150 million in 2012 to $90 million at year end but inventories rose to $251 million from $217 million in 2012. The company has current liabilities of just $75 million compared to current assets of $539 million at the end of September and shareholders’ equity stands at $700 million.

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Images courtesy of www.saladafoodsja.com

Salada Foods, producers of Mountain Peak instant coffee, reports lower profit in the June quarter, a continuation of lower profit in the March quarter versus the same periods last year. Profit came in at $42 million after tax for the latest quarter and $95.4 million year to date versus $52.49 million and $106.6 million respectively to June. Profit for the March quarter was $29.3 million, down from $35 million in 2012.

The lower profits for the March 2013 quarter occurred as sales were lower, emanating from price reductions in the quarter implemented to stimulate sales and market penetration as well as increased cost associated with the new brands being produced by Mountain Peak Ltd. The reduction resulted in sales in monetary terms for the quarter falling 15.6 percent to $141 million, a $26 million decline. Sales for the June quarter were down to $198 million compared to $246 million in 2012, off 21 percent and year to date, $491 million and $532 million in 2012, an 8 percent decline. The level of sales would have been expected to result in worse performance in profits, but better margins helped negate the effects of the fall off.

IC Insider has been reliably advised that the reduced sales is not an indication that demand by consumers have declined but it is more tied to excess inventory being held in the trade that is affecting demand directly from Salada. Translated, sales in the past was inflated to the extent that the trade was building up inventories and the needed adjustment is now taking place.

Expenses | Selling and Promotional expenses rose 29 percent to $15.6 million in the quarter and 24 percent to $29.6million. Administrative expenses rose 24 percent to $25.3 million in the quarter and 23 percent to $75.4 million for the six month.

The increase is attributed primarily with the commencement of operations for Mountain Peak Foods Ltd under which the acquired Roberts brands of processed condiments are being processed and marketed. In addition to this brand, the group is marketing under the Mountain Peak brand as well.

Finances | Salada is clearly very conservatively managed, as can be seen from some of the financial ratios. The company has a large current asset ratio of 9 to 1, well above accepted norms, with cash and investments of $207 million. There was no interest bearing debt on the books, and equity was a high $711 million.

The earnings for the year to September should exceed a $1.40 per share. This could mean that the stock may not have much room to climb in the current market environment. Interest ought to be focusing on 2014 when the new products being produced by the Mountain Peak boost sales and hopefully profit.  There are limited supplies of the company’s stocks to trade, so anything is possible with the stock price if demand comes in for them.

Related Post | Salada’s stock price may be stuck

Salada Foods, best known as producer of Mountain Peak instant coffee, reported lower profits for the March 2013 quarter as sales were lower, emanating from price reductions implemented to stimulate sales and market penetration. The reduction resulted in sales for the quarter falling 15.6 percent to $141 million a $26 million decline. Six months sales were up nevertheless by 2.5 percent. Administrative expenses rose 27 percent to $40.6 million to $50 million for the six months period. The increase is attributed primarily with the commencement of operations for Mountain Peak Foods which is the company used to acquire the Roberts brands of processed condiments.

For the six month period, sales were $294 million and $286 million in the similar period in 2012. Profit for the period after tax came in at $55 million while the 2012 net figure was $54 million.

Salada is clearly very conservatively managed as can be seen from some of the financial ratios. The company has a large current asset ratio of 9 to 1, well above accepted norms, with cash of $223 million. There was no interest bearing debt on the books and equity was a high $668 million.

Stock outlook | The earnings for this year which ends in September should exceed a $1 per share. This could mean that the stock may not have much room to climb in the current market environment. There are limited supplies of the company’s stocks to trade, so anything is possible with the stock price if demand comes in for them.