Investing in undervalued stocks is a great way to make money in the stock market. Sometimes it requires patience, a trait that is a big virtue in picking stocks that will be great performers in the future. One such stock is Jamaica Broilers, a pioneer in the poultry industry with the processing of pre-dressed chickens.
For the just concluded 2024 fiscal year, Jamaica Broilers Group reported profits of $6 billion compared to $4.3 billion in 2023 but the latest fiscal year’s results were buoyed by $2.27 billion from gains from sale of assets of a USA subsidiary, International Poultry Breeders Hatcheries.
Excluding the one-time gain, profit would approximate $4.20 per share compared to $4.43 last year. The 2024 decline is worse than the initial appearance, with profit in 2023 being negatively affected by a $1 billion loss from discontinued operations, in Haiti, excluding that loss the company would have earned $5.40 per share in that year.
The 2025 fiscal year is off to a slow start, with revenues of $23.45 billion up marginally from $23.39 billion in the similar quarter in 2024. Profit before and after tax fell in the quarter with net profit coming in at $1.1 billion versus $1.24 in 2023. The disappointing revenue performance in the latest quarter, occurred in the Jamaican operations with revenues of $14.07 billion down from $14.32 billion in 2024, pushing segment profit down to $1.59 billion from $1.75 billion. The US segment saw a minor revenue increase to $9.39 billion from $9.07 billion with segment profit slipping marginally to $1.165 billion from $1.175 billion.
Jamaica Broilers chicken
Revenues in the final quarter of the 2024 fiscal year were flat with that of 2023, due to an extreme tightening in the local economy that negatively affected sales across a wide cross-section of the local economy. While revenues for the nine months to January grew by 2.7 percent to $70.35 billion from $68.5 billion in 2023, revenues for the April quarter declined from $22.85 billion in 2023 to $22.6 billion, with the January quarter rising just under 4 percent to $70.35 billion from $68.50 billion in 2023.
The most positive development during the last fiscal year was a sharp fall in direct material input cost of raw materials used in production that fell to $45.89 billion from $48.17 in 2023, the decline in the Jamaica operation was more muted falling to $32.24 billion from $33.69 billion. A 14 percent rise in staff costs to $20 billion from $17.68 billion more than wiped out the gains from reduced material costs. The Jamaican operation had a 12.6 percent increase in staff cost to $9.38 billion from $8.3 billion in 2023.
Advertising and promotion expenses jumped 71 percent to $950 million from $556 million in the 2023 fiscal year but grew over two percent to $737 million in the first quarter to July this year. Administrative expenses rose just over 4 percent to $12.94 billion from $12.4 billion in the 2023 fiscal year and they were flat for the July 2024 quarter with that of 2023 at $2.9 billion. Finance costs jumped 45 percent to $2.68 billion from $1.85 billion and rose just over 3 percent in the July 2024 first quarter to $653 million.
Gross Profit margin in the latest fiscal year was 25.6 percent the same as in 2023 and operating profit rose marginally to $23.79 billion from $23.4 billion in 2023. In the July 2024 quarter, gross profit slipped from $5.7 billion in 2023 to $5.5 billion in 2023.
Segment results show the Jamaican division enjoying a one percent increase in revenues to third parties of $59.5 billion from $58.8 billion, contributing segment results of $8.3 billion, up from $7.6 billion in 2023 and the USA segment saw a 55 percent rise in profit to $5.9 million with the gain on sale of assets contributing to the growth, from $3.8 billion with revenues rising 2.8 percent to $33.45 billion from $32.55 billion in 2023. Other Caribbean
Operations delivered a loss of $652 million from a profit of $1.89 billion in 2023. Importantly, the group’s directors report, “In our pursuit of regional expansion, we’ve now successfully entered the Trinidad and Tobago market. Although still in its early stages, we anticipate substantial sales growth in this territory. The addition of this new market has already contributed to a remarkable 8 percent increase in export sales.”
The operations generated a Gross cash flow of $8 billion but growth in working capital, reduced it to a cash deficit of $2.5 billion, after addition to fixed assets dividend payment of $821 million and net loan payments, a deficit of $2 billion was incurred and resulted in cash funds falling to $2.8 billion.
Current assets ended the period at $59 billion at the end of April, including trade and other receivables of $6.3 billion, and inventories, including livestock amounting to $50 billion. Current liabilities ended the period at $40 billion. Net current assets ended the period at $19 billion.
At the end of the 2024 fiscal year, shareholders’ equity amounts to $30.8 billion with long term borrowings at $14 billion and short term at $20 billion.
The Group has capital commitments of US$4.46 million, down slightly from US$5.8 million in 2023, but spent $$2.29 billion or nearly US$15 million in the latest fiscal year, up from J$1.77 billion in 2023.
IC Insider.com projects earnings of $5.50 per share for the fiscal year ending April 2025, with a PE of 5.7 times the current year’s earnings based on the price of $31.50, the stock traded at on the Jamaica Stock Exchange Main Market and less than half of the average for the Main Market of 14.1. Net asset value at the end of July is $31.87 with the stock selling in line with book value.
Profit after tax more than doubled to $15 million from just $7 million last year and almost tripled before tax to $20.4 million. The first quarter net profit represents 43 percent of 2024 full year earnings of $37 million, this points to the potential for increased profits for the current year. Also of import, is data showing, the second and fourth quarters account for 7 percent and 11 percent more sales revenues than the immediately preceding quarters, resulting in around $55 million and $85 million in sales, respectively.
At the end of May, shareholders’ equity amounts to $878 million with long term borrowings at $1.1 billion and short term at $108 million. The increased borrowing was used in financing the increased fixed asset that now is on the books at $1.74 billion and is up from $825 million at the end of February 2021.
For the July 2024 quarter, other comprehensive income pushed total profit to $6.4 billion for the latest quarter versus $5.5 billion in 2023 and to $9.15 billion for the nine months after accounting for negative other comprehensive income of $4.85 billion and $9.17 billion in 2023 after negative other comprehensive income of $3.4 billion.
The group increased the dividend payment to 40 cents in October last year, from 35 cents in July 2023. The increase is in line with profit for the nine months to July. Based on historical trends, the increase is consistent with payments of 45 cents per quarter until July 2025 with a likely increase in the October payment. That would put the dividend yield at more than 4 percent at $1.80 per annum.
Inventories represent 3.4 months of the cost of sales, suggesting that there are adequate supplies to fuel continued high levels of sales. Cash and bank balances ended at $235 million, down from $350 million in 2023. Shareholders’ Equity amounts to $1.35 billion and long term liabilities at $835 million.
The price recently slipped to a low of 70 cents, following a 55 percent drop in first quarter profit to $10 million from $23 million in 2023, following a 21 percent fall in revenues from $115 million in 2023 to $91 million.
This strategic move to the Main Market reflects our commitment to continuing this trajectory of success and delivering enhanced value to our shareholders.” They go on to further state “Since our listing, revenue has grown more than threefold, from $1.8 billion to $5.7 billion forecasted for this fiscal year ending September 30, 2024.”
The improved profit flowed from reduced costs and better margins as revenues fell sharply in the Media segment, with a $100 million reduction to $206 million. Segment profit fell from $43.5 million to $31.9 million. Media was not the only area of contraction, production had a minor drop in revenues to $127 million from $130 in 2023 but delivered a $13 million fall in profit contribution to $50.6 million from $63 million in 2023. The agency segment saw profit contribution jumping $98 million from $86 million in 2023 with revenues rising from $102 million to $113 million.
Selling and distribution cost expenses declined in the half year and second quarter by 36 percent to $966,245 in the half million from $1.5 million and by xxx percent in the quarter to $484,477 from $810,997 in 2023. Finance cost declined in the quarter, to $2.6 million from $3.5 million in 2023 and from $6.9 million to $5.2 million for the six months. Finance Income rose from $922,872 to $5.33 million in the quarter and for the six months, it moved from $4.5 million to $8.4 million.
Investors buying into the public offer of NCB Financial Group stock at $65 each in May are hugging up an 18 percent loss on their investment since, with the stock hitting a 52 weeks’ low of $54.66 on Monday and ending at a closing low of $55 after more than 1.5 million shares were traded, following a sizable 3 million share trade on June 17, when the stock closed at $59.
NCB is a diversified financial group, providing services in general insurance, life insurance, banking and investments management. The group is also geographically diversified with operations in Trinidad, Bermuda and Jamaica. It has a solid base that it can use to produce increased revenues and profits in the future.
