Caribbean Cream is reporting a subdued 19 percent increase in third quarter profit to November, well down from the 79 percent increase for the May quarter, but better than the drop from $7.9 million to only $1.3 million for the August quarter.
Based on the first quarter IC insider forecasted earnings to climb to 40 cents for the fiscal year and to rise to 70 cents in 2016. For the year to February in 2014, earnings came out at only 11 cents per shares, which was up from 5 cents the year before. IC Insider has revised the 2015 fiscal year results, to 22 cents and the 2016 to 60 cents. The reduction is partially due to a 64 percent jump in marketing and administrative cost in the August quarter compared with a 20 percent increase in sales revenues and a 28.5 percent increase in gross profit. For the period to November marketing, administrative and finance cost jumped by 56 percent to $173 million. The sharp increased marketing and administrative cost, looks like settling off, after the company revved up expenditure in these areas to better align management and operations with increasing business activity.
Last year, Management indicated that cost associated with the JMA Expo and development cost for the new Kremi advertising campaign, launched at the end of June, helped push cost in marketing and advertising. The new packaging for the retail products was launched in May, the company reported.
Sales revenues climbed 26 percent in November and is up from 20 percent in the prior periods and is up 22 percent for the nine months to hit $741 million. Growth in sales has slowed and is well down on the growth rate for the February and April quarters, at 48 percent each and 27 percent for the July quarter of 2013. Improvement in the plant and new packaging, should help in moving sales to a higher level, than the slower pace over the last three quarters.
Gross profit margin jumped to 47 percent in the latest quarter from 37 percent in the 2013 period but for the year to November the margin is at 38 percent up from 0 percent for the nine months period in 2013. Going forward margin should improve even more with the blast freezer installed in November which management says will cut utility cost with less usage and create capacity for greater production to enhance sales volumes. With the installation, Manager indicates they will be able to meet the increased demand for the 2014 Christmas period. The management report was released in January, accordingly, the information on demand would most likely be based on actual sales. The company increased prices ahead of the Christmas period but the increase may well have slowed down sales volume growth.
Kremi paid over $63 million in electricity cost in 2014 fiscal year with the last quarter at $18 million. The company will benefit from less usages with the more efficient freezer going forward as well as from the reduction in electricity cost with the fall in the price of oil and the pass through effect on JPS bills, to their customers.
During the year to November, capital expenditure amounted to $56 million spent on the blast freezer and was geared to improving efficiency in the factory. Equity capital stands at $261 million and borrowed funds at $155 million of which $12 million is due to be repaid in a year’s times.
The stock last traded at 80 cents each but with our forecast for the 2015 fiscal year that ends in February the PE works out at 3.6. The company is in the business of production and sale of ice cream and is listed on the junior stock exchange market.