SEP reports 93% growth in year end net profit

Date: February 18, 2019

Seprod Limited (SEP) posted revenue totalling $24.38 billion compared to $16.51 billion recorded for the same period of the prior financial year, representing a 48% increase year over year. The Manufacturing Division recorded a 30% growth to close at $18.92 billion (2017: $14.59 billion), while the Distribution Division increased by 64% closing at $11.25 billion (2017: $6.87 billion). For the quarter, Revenue climbed grossly closing at $8.88 billion relative to $4.37 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. Had these operations been included in the Group’s results in 2017 (and excluding the effect of the acquisition of the Facey Consumer business mentioned below), the increase in revenues for the twelve (12) months ended 31 December 2018 would have been J$4.67 billion or 29% and the increase in net profit would have been J$323 million or 46%.”

Management further indicated that the 2018 results also surged due to, “the acquisition of Facey Commodity Company Limited effective 1 October 2018. As of that date, Facey’s sole business comprises the distribution of consumer goods and pharmaceutical products in Jamaica. This acquisition serves to strengthen the Seprod Group’s distribution platform – a key strategic priority for the Group. This acquisition contributed revenues of J$3.42 billion and net profit of J$218 million for Q4.”

Cost of Sales increased by 39% from $12.69 billion to $17.63 billion, resulting in gross profit increasing by 76% to close at $6.75 billion (2017: $3.82 billion). For the quarter, gross profit closed the period at $1.74 billion relative to $876.39 million in the previous comparable period.

Finance and other operating income totalled $795.26 million compared to $753.10 million in 2017, a 6% improvement year over year. For the quarter, finance and other operating income decline marginally by 0.24% to close at $113.25 million (2017: $113.52 million).

Selling expenses increased slightly by 4% to close the year end period of 2018 at $650.79 million (2017:  $624.93 million). However, Administrative expenses for the period climbed by 71% to total $4.49 billion versus $2.62 billion in 2017. For the quarter, Selling expenses and Administrative expenses closed at $66.15 million (2017: $66.70 million) and $1.14 billion (2017: $804.02 million), respectively.

As such, Operating profit grew 62%, moving from $1.33 billion to $2.41 billion to close the year end period of 2018. For the quarter, operating profit totalled $653.84 million (2017: $119.19 million).

Finance costs amounted to $771.50 million (2017: $337.77 million), an increase of 128% year over year. For the quarter, finance cost closed at $298.06 million compared to $85.31 million in the prior comparative quarter.

Profit before taxation increased to $1.71 billion in 2018, an 82% increase on $938.96 million reported a year prior. Profit before taxation for the fourth quarter amounted to $415.83 million (2017: $46.72 million).

Seprod reported net profit of $1.25 billion, a growth of 93% relative to last year’s corresponding period of $647.84 million, after incurring taxes of $462.55 million (2017: $291.12 million). For the quarter, net profit increased by 332% to $280.94 million compared to $65.05 million in 2017.

Net profits attributable to shareholders amounted to $1.35 billion, a year over year improvement from the $735.04 million recorded a year earlier. For the quarter, net profit attributable to shareholders totalled $304.27 million (2017: $9.89 million).

Consequently, earnings per share (EPS) for the year ended December 31, 2018 amounted to $1.84 relative to $1.00 for the corresponding period in 2017. Earnings per share for the quarter was recorded at $0.41 (2017: $0.01). SEP last traded on February 18, 2019 at $39.00.

The Company highlighted that, “consistent with the Group’s Q3 report, the business continues its strong trajectory; as the investments in acquisitions, distribution expansion, product innovations, increased exports and retooling of the manufacturing base continue to yield positive results.

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 December 31, 2018, the Company’s Total Assets increased by 84% to $36.86 billion from $20.01 billion a year ago. The increase in assets was largely due to an improvement in ‘Property, Plant and Equipment’ amounting to $7.28 billion (2017: $4.10 billion) and ‘Inventories’; which closed at $6 billion (2017: $2.50 billion). Intangible assets as at December 31, 2018 amounted to $6.59 billion compared to nil in 2017.

Shareholders’ Equity for the period ended at $15.89 billion relative to $9.89 billion last year, indicating a 61% increase. This translated into a book value per share of $21.66 (2017: $13.48).

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