DTL posts 37% increase in nine months net profit

Date: November 15, 2018

Derrimon Trading Limited (DTL), for the nine months ended September 30, 2018, reported consolidated trading income of $6.34 billion, increasing by 29% when compared to the $4.92 billion for the prior period. For the quarter, the Company reported a 23% increase in trading income totalling $2.18 billion relative to $1.77 billion in the previous corresponding quarter. The Company mentioned that, “The result reflects the first month of revenue from the new SM Jahleel Distribution agreement but excluded the 23 days revenue from Woodcats International Limited.”

DTL indicated that, “traditionally, the third quarter has always been the quarter in which the Company experienced its slowest growth due to the seasonality of consumer spending during the summer months. Notwithstanding this observation, the Company experienced growth in its full business during the nine (9) months period. The road construction at Marcus Garvey Drive has adversely affected the operations of the Sampars store and the Distribution Centre based at this location. Through proper planning and execution on the part of our dedicated staff we have managed to limit the financial losses of this disruption.”

The Company further highlighted that, “During this quarter, we experienced steady growth in our revenue in both the distribution and retail segments of the business. With the addition of the new line of SM Jahleel products during the month of September, we were very encouraged by the execution of the team and acceptance of the brand by our various partners. Our ability to respond to our customers’ needs on a timely basis along with improvement in our logistics and distribution in both segments of the business, remains some of our critical success factors.”

Cost of sales increased by 31% to $5.21 billion for the period (2017: $3.98 billion). As a result, Gross profit amounted to $1.13 billion relative to $939.22 million the year prior, an increase of 21% year over year. Gross profit for the quarter totalled $357.64 million (2017: $320.79 million). DTL stated that, “This continues to reflect a combination of improvement in margins arising from strategies employed within both the distribution and retail segments, the positive impact from culling some products from the distribution portfolio, improved margins from growth of the supermarket portfolio and the impact of the one-month performance of the new beverage distribution portfolio.”

Other income for the period improved grossly by 145% to close the nine months at $43.75 million compared to $17.85 million in 2017. For the quarter, other income closed at $19.43 million (2017: $6.50 million).

Total operating expenses was $885.65 million for the period under review, representing a growth of 23% on the $721.21 million recorded in the prior year. For the quarter, total operating expenses closed at $301.58 million (2017: $248.78 million). According to DTL, “the major factors for this increase were, the full impact for the quarter of utilities and its repricing due to the adverse movement in the foreign exchange rate, repricing of the US dollar denominated rent, increased distribution costs (contract trucking cost, staff cost, warehouse cost, and insurance for the new SM Jahleel portfolio), cost associated with the full negotiation and acquisition of Woodcats International Limited, marketing and advertising, internal and external audit fees.”

Administrative expenses totalled $757.97 million, 19% more when compared to the $639.21 million in 2017. Selling and distribution expenses recorded a 56% increase for the consolidated period, totalling $127.69 million (2017: $82 million). For the quarter, administrative expenses and selling & distribution expenses closed at $249.48 million (2017: $223.72 million) and $52.10 million (2017: $25.06 million).

Finance cost increased by 7% amounting to $111.37 million for the period versus $104.31 million in 2017. For the quarter, finance cost closed at $43.05 million (2017: $51.28 million). It was noted that, “strategies to reduce this aspect of our Company’s cost continue to be implemented and the associated savings are being realized on an ongoing basis in the short to medium term. The funding associated with the acquisition of Woodcats International Limited and the associated interest cost impacted the finance charges during this quarter.”

No taxes were reported for the period, as such Net profit amounted to $180.55 million, a 37% increase year over year when compared to $131.56 reported in 2017. The Company posted a 19% increase in net profit to close the quarter at $32.45 million (2017: $27.23 million).

Earnings per share (EPS) closed the consolidated period at $0.07 (2017: $0.05), while for the quarter the EPS was $0.01 (2017: $0.01). The twelve-month trailing EPS amounted to $0.09. The total number of shares used in the computation amounted to 2,733,360,670 units. Notably, DTL closed the trading period on November 14, 2018 at a price of $2.70.

Balance Sheet Highlights

As at September 30, 2018, the Company’s consolidated total asset amounted to $3.37 billion, $535.18 million more than its value as at September 30, 2017 of $2.83 billion. This was due to 103% growth in ‘Fixed Assets’ and an 121% increase in ‘Investment’ to total $442.87 million (2017: $218.29 million) and $311.40 million (2017: $140.87 million), respectively.

DTL added that, “the non-current assets of the company increased by $576.13 million which is reflected in Investment in subsidiary and represents the consideration made for the acquisition of Woodcats international during this reporting period.”

Shareholders’ Equity totalled $998.78 million (2017: $977 million), which translated to a book value per share of $0.37 (2017: $0.36).

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