JP reports 30% decrease in six months net profit

August 12, 2020

Jamaica Producers Group Limited (JP), for the six months ended June 30, 2020, experienced a 6% decrease in revenue to total $9.52 billion compared to the $10.16 billion reported in 2019. The company posted second quarter revenue of $4.36 billion, a 19% decrease on 2019’s $5.37 billion.

The revenue for the Food & Drink Division decreased 3% to total $5.76 billion relative to the $5.95 billion reported in 2019. Management noted that, “The F&D Division comprises our portfolio of subsidiaries that are engaged in farming, food processing, distribution and retail of food and drink, has production facilities in Europe and the Caribbean and operates a distribution centre in the United States. Our range of specialty food and drink products includes fresh juices, tropical snacks, fresh fruit and Caribbean rum-based confectionery and baked goods. A.L. Hoogesteger Fresh Specialist B.V. (“Hoogesteger”) is the largest contributor to the revenues and profits of the Division. This business is a market leader in fresh juice in northern Europe and serves as a co-packer of juice for major supermarkets and food service entities in the Netherlands, Belgium, Scandinavia and Switzerland.”

Revenue in the Logistics and Infrastructure Division decreased 11% year over year to total $3.76 billion (2019: $4.21 billion).

The Corporate Services division earned $45.17 million relative to $44.51 million in 2019, a 1% increase.

The cost of sales for the six months increased by 1% to total $6.71 billion compared to $6.65 billion reported for the comparable period in 2019. As a result, gross profit decreased to $2.81 billion, a 20% decline on the $3.50 billion documented in 2019. Gross profit for the second quarter amounted $1.21 billion compared to $1.85 billion booked for the same quarter of 2019. Other income increased to $360.41 million, a 122% growth relative to $162.68 million booked in the prior corresponding period.

JP’s marketing, selling and distribution expenses rose 2% to close at $1.86 billion, this compares to $1.83 billion booked a year earlier. JP also recorded a share of loss in joint venture and associated company of $4.16 million, relative to profit of $5.83 million in the previous year.

Finance cost was reported at $148.94 million for the period relative to the $156.21 million reported in 2019. This resulted in a profit before taxation of $1.15 billion for the period (2019: $1.68 billion). Profit before tax for the second quarter totalled $441.86 million versus $1.02 billion reported for the same quarter of 2019.

The Company incurred tax charges of $216.11 million (2019: $341.49 million). Consequently, net profit for the period fell 30% to $938.19 million (2019: $1.34 billion). Notably, net profit attributable to stockholders totalled $346.97 million; this compared to $629.29 million, a 45% decline. Net profit attributable to shareholders for the quarter fell 68% to total $126.96 million relative to the $398.91 million 2019.

Total comprehensive income for the six months ended June 30, 2020 amounted to $1.26 billion (2019: $1.52 billion). Meanwhile for the quarter, total comprehensive income totalled $657.30 million (2019: $1.08 billion).

Earnings per share for the period amounted to $0.31 (2019: $0.56). EPS for the quarter amounted to $0.11 (2019: $0.36), while the twelve-month trailing earnings per share amounted to $0.82. The number of shares utilized in the computations amounted to 1,122,144,036 units. JP stock last traded on August 11, 2020 at $23.14.

The Group highlighted that, “JP operates a portfolio of businesses in Europe and the Caribbean. The COVID-19 pandemic has had slightly different implications for each of our businesses and has affected their performance and the outlook for the remainder of the year in different ways. Our food businesses have managed to maintain core sales to supermarkets for ‘take home’ consumption. However, our sales to food service channels, convenience or roadside channels (in the Caribbean), travel retail and the hospitality sector were adversely affected in the second quarter.”

JP further added, “although we maintained excellent service levels and robust supply chain management across all of our businesses, we incurred higher raw material costs, particularly in the global supply of fresh fruit for our European juice business. These challenges are likely to continue during the worst of the COVID-19 pandemic, but we do not believe them to be permanent in nature, and we remain confident that our largest customers remain committed to our product offerings. Nevertheless, during the second quarter we took definite steps to restructure and reduce our cost base and at the same time, develop new sales channels – particularly for those segments of our business that were most dependent on travel retail and hospitality. Among other early signs of success, these initiatives saw increased sales of Tortuga rum cakes in ecommerce and US mainstream retail channels.”

Management explained that the, “logistics business is exposed to the range of factors that affect the level of trade between Jamaica and its key trading partners. Our transshipment operations are also affected by the overall level of global trade. During the second quarter, we experienced reduced volumes related to challenges in organising shipments (particularly shipments involving consolidated cargo) due to lockdowns in the US and the UK and deferred purchases of some classes of durable goods such as vehicles and heavy equipment and goods that directly service affected industries such as tourism. We are responding to these challenges by implementing a series of measures and technological solutions to better facilitate the clearing and handling of cargo under the current conditions. We have also taken steps to reduce costs and maintain our strong competitive position in the market for the services we offer. Over the medium term, we will further strengthen the business by improving our specialised capability of handling a wider range of cargo types. This has led to business growth in the past and we expect this to continue.”

Balance Sheet Highlights:

As at June 30, 2020, the company’s assets totalled $38.31 billion, 1% more than its value of $37.89 billion a year ago. This increase in total assets was due largely to increases in ‘Property, Plant and Equipment’ and ‘Securities Purchased Under Resale Agreements’ which amounted to $22.27 billion (2019: $21.56 billion) and $5.86 billion (2019: $5.23 billion), respectively. This was partially offset by a 55% decrease in ‘Rights-of- use assets’ to $690.86 million (2019: $1.53 billion).

The Company ended the period with equity attributable to equity holders of the parent in the amount of $14.48 billion relative to $13.49 billion in 2019. The company now has a book value per share of $12.90 versus $12.02 in 2019.

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