It seems to have taken a bit longer than expected for Caribbean Cream to start showing some of the major potential it exhibited on going in public in 2013. Slower revenue growth and higher cost are some of the factors that held back the promised profit out turn. The company now seems over those initial drags and appears poised for a fabulous year, with increased profits and big gains in the stock price, well above the $2.50 peak, reached in July.
That seems to be receding with a big jump in profits for the full year to February when profits climbed to $57 million from $35 million for 2014 and a big leap in the first quarter ending May, jumping 138 percent to $39 million. Growth was only constrained by added cost for cleaning and sanitation which helped push administrative cost to $56 million by $20 million. Loans are down $20 million and brought interest cost down. Inventories fell from $96 million to $61 million, the fall in the world market price for milk powder would have been a major factor behind this, coupled with a greater level of stability of the Jamaica dollar that would suggest there was little benefit from having large amounts of inventories. Trade receivables climbed $20 million, cash moved to $51 million from $17 million in 2014 and could end up around $200 million by the end of fiscal year to February 2016, payables declined from $109 million to $80 million and equity capital has moved to $326 million, lending strength to the company’s improving financial health.
For the quarter, revenues climbed 15 percent to $289.2 million from $251.5 million in May 2014 and was better than for the February quarter of $273 million. The growth in revenues is better than the 11 percent garnered in the February quarter. Lower operating expenses of $178 million versus $183 million in 2014 drove gross profit up 61 percent with profit margin jumping to 38 percent from 27 percent in 2014 and was helped by a 13 percent price increase ahead of the February quarter. Marketing costs remain static at $11 million while interest cost fell from $5.8 million to $4.6 million.
Earnings came in at 10 cents per share, well over the 4 cents reported in 2014 and not very far from the full year earnings of 15 cents. Earnings for fiscal year ending 2016 should hit 75 cents per share as cost savings and marketing measures take effect. The price of milk powder, a major input into the production of ice cream, fell 25 percent since the end of the May quarter to the end of August on the US market and looks like it headed lower, will result in major cost savings. The company enjoys 5 years tax free holiday commencing in 2013 when it listed on the junior market of the Jamaica Stock exchange and after that is entitled to 5 years of taxation at half the regular tax rate.
The stock traded at $1.67 on Friday on the junior market of the Jamaica Stock Exchange but was as high as $2.50 coming from a low of 61 cents earlier in the year. The next set of results due early October, will most likely give the stock another shot in the arm.