SEP reports 66% growth in nine months net profits

Date: November 13, 2018

Seprod Limited (SEP) posted revenue totalling $15.50 billion compared to $12.14 billion recorded for the same period of the prior financial year, representing a 28% increase year over year. The Manufacturing Division recorded a 34% growth to close at $14.61 billion (2017: $10.94 billion),while the Distribution Division recorded a slight increase by 1% closing at $5.24 billion (2017: $5.20 billion). For the third quarter, Revenue climbed by 34% to total $5.07 billion relative to $3.77 billion reported the prior year’s corresponding quarter.

SEP noted that, “The 2018 results are bolstered by the transfer of the former Jamaican dairy operations of Nestle within the Group effective 1 January 2018. These operations, located in Bog Walk, St. Catherine, produce the Supligen and Betty products, as well as co-manufacture products for international customers. In 2017, these operations were operated by Seprod under a management services contract and were not included in the Group’s results.”

Cost of sales increased by 14% from $9.19 billion to $10.50 billion, resulting in gross profit increasing by 70% to close at $5 billion (2017: $2.95 billion). For the quarter, gross profit closed the period at $1.56 billion relative to $895.48 million in the previous comparable period.

Finance and other operating income totalled $682.01 million compared to $639.59 million in 2017, a 7% improvement year over year. For the quarter, finance and other operating income went up significantly by 78% to close at $452.87 million (2017: $255.04 million).

Selling Expenses increased slightly by 5% to close the nine months period of 2018 at $584.64 million (2017: $558.23 million). However, Administrative Expenses for the period climbed by 84% to total $3.35 billion versus $1.82 billion in 2017. For the third quarter, ‘Selling Expense’ and ‘Administrative Expenses’ closed at $348.23 (2017: $197.23 million) and $1.07 billion (2017: $588.80 million), respectively.

As such, Operating Profit grew 45%, moving from $1.21 billion to $1.75 to close the nine months period of 2018. For the quarter, operating profit went up 64% to total $598.63 million (2017: $364.48 million).

Finance costs totalled $473.44 million (2017: $252.46 million), an increase of 88% year over year. For the quarter, finance cost closed at $164.13 million compared to $82.45 million in the prior comparative quarter.

Profit before taxation increased to $1.30 billion in 2018, a 45% increase on $892.25 million reported a year prior. Profit before taxation for the third quarter amounted to $437.34 million (2017: $256.40 million).

Seprod reported net profit of $969.66 million, a growth of 66% relative to last year’s corresponding period of $582.79 million, after incurring taxes of $327.66 million (2017: $309.45 million). For the quarter, net profit increased by 207% to $371.26 million compared to $120.95 million in 2017.

Net Profits attributable to shareholders amounted to $1.05 billion, a year over year improvement from the $725.15 million recorded a year earlier. For the third quarter, Net Profit attributable to shareholders totalled $386.26 million (2017: $194.16 million).

Consequently, Earnings per share (EPS) for the nine months ended September 30, 2018 amounted to $1.43 relative to $0.99 for the corresponding period in 2017. Earnings per share for the third quarter was recorded at $0.53 (2-17: $0.26). The twelve months trailing EPS is $1.53. SEP last traded on November 13, 2018 at $35.48.

Management highlighted that, “the operation of the grains mill continues to improve steadily, as the distribution footprint widens, and consumers become more exposed to the high-quality Gold Seal brand. The other operations – dairy, biscuit, oil & margarine – had solid results, as the Group continues to reap the benefits of product innovations, increased exports, acquisitions and improved productivity from retooling.”

Furthermore, Seprod stated that, “Unfortunately, the Group suffered a J$275 million loss in the sugar operation for the period and we are now actively engaged in discussions with stakeholders as we move to eliminate these losses in the sugar manufacturing operation.”

Balance sheet at a Glance:

As at September 30, 2018, the Company’s Total Assets increased by 30% to $23.36 billion from $18.03 billion a year ago. The increase in assets was largely due to an improvement in ‘Fixed Assets’ amounting to $6.69 billion (2017: $3.99 billion) and ‘Inventories’; which closed at $4.10 billion (2017: $2.08 billion).

Shareholders’ Equity for the period ended at $10.76 billion relative to $10.20 billion last year, indicating a 5% increase. This translated into a book value per share of $14.66 (2017: $13.90).


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