SALF reports 33% decline in six months net profit

Date: May 13, 2019

Salada Foods, recorded a 3% increase in turnover for the six months to close at $494.50 million (2018: $482.27 million). For the second quarter, revenue amounted to $322.17 million (2018: $254.51 million), a 27% rise. SALF highlighted that the, “improved performance was attributed to stronger sales in export markets, particularly Barbados which improved by 91% when compared to prior year. Domestic sales remain favourable.”

Cost of sales for the period under review increased by 12% to close at $ 326.83 million relative to $291.04 million in 2018. As such, gross profit amounted to $167.67 million, a 12% decline year over year from the $191.23 million booked in the prior corresponding period. Gross profit for the second quarter posted a 25% growth to close at $133.66 million (2018: $106.76 million).

Other operating income for the six months amounted to $4.46 million relative to $2.03 million in 2018. For the quarter, other operating income amounted $4.46 million (2018: $602,000).

Administrative expenses climbed by 12% to $68.66 million (2018: $61.06 million). The Company stated that, “this increase is attributable to staff related costs.” Also, selling and promotional expenses inched up 1% from $24.83 million in 2018 to $25.13 million in 2019.

Consequently, this resulted in an operating profit of $78.34 million, down 27% compared with the $107.37 million reported for the corresponding six months in the prior year. Operating profit for the quarter recorded a 43% improvement to $94.07 million (2018: $65.78 million).

The Company reported net finance loss of $10.23 million for the period, this compares to net finance loss of $52,000 for the same period in 2018. While, for the quarter, net finance loss closed at $6.60 million versus net finance income of $5.68 million reported in the prior comparable period. The Company mentioned that, “the large swings in the exchange rate continues to negatively impact gains on investments.”

Profit before taxation fell by 37% to $68.11 million versus $107.32 booked for the previous year’s corresponding period. For the quarter, profit before taxation went up 22% to close at $87.47 million (2018: $71.46 million).

Net profit for the six months declined 33%, from $80.28 million in 2018 to $53.77 million in 2019, following taxation of $14.34 million (2018: $27.04 million). Net profit for the quarter rose by 48% to $76.85 million (2018: $53.51 million).

Net profit attributable to shareholders for the six months amounted to $53.98 million relative to $80.63 million twelve months earlier. Profit attributable to shareholders for the quarter amounted to $76.96 million (2018: $53.61 million).

Earnings per share for the six months amounted to $0.52 (2018: $0.78). The EPS for the second quarter was $0.74 (2018: $0.52). The trailing twelve-month EPS is $1.86. The number of shares used in our calculations are 103,883,290 units. SALF stock price closed the trading period on May 10, 2019 at a price of $31.01.

SALF indicated that, “profitability has been adversely affected as the full impact of the cess on imported green beans used in the manufacturing of instant coffee is now realized.” The Company further noted, “the cess came into effect April 2018 and would not have impacted our prior year’s results.”

Furthermore, the Company stated that, “at the end of March, a total of 22,535.25 boxes of coffee cherries were acquired since the launch of the initiative in November 2018 to purchase local coffee and assist the local coffee industry. The company has spent $179M on the project to include cherry acquisition and further processing to green beans. Conditions are favourable for sale of the higher grades of beans acquired and the other grades will be used in both instant coffee manufacturing process and roasted and ground lines.”

Balance Sheet at a Glance:

As at March 31, 2019, total assets rose by 12% or $120.87 million to $1.15 billion. This increase was primarily driven by ‘Investments’ and ‘Inventories’ which amounted to $109.39 million (2018: $61.27 million) and $341.42 million (2018: $234.39 million), respectively. ‘Receivables’ also contributed to this increase to close at $326.52 million (2018: $243.90 million).

Shareholders equity as at March 31, 2019 amounted to $935.70 million (2018: $830.74 million) resulting in a book value per share of $9.01 (2018: $8.00).



Analyst Certification -The views expressed in this research report accurately reflect the personal views of Mayberry Investments Limited Research Department about those issuer (s) or securities as at the date of this report. Each research analyst (s) also certify that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendation (s) or view (s) expressed by that research analyst in this research report.

Company Disclosure -The information contained herein has been obtained from sources believed to be reliable, however its accuracy and completeness cannot be guaranteed. You are hereby notified that any disclosure, copying, distribution or taking any action in reliance on the contents of this information is strictly prohibited and may be unlawful. Mayberry may effect transactions or have positions in securities mentioned herein. In addition, employees of Mayberry may have positions and effect transactions in the securities mentioned herein.