July 26, 2021

Seprod Limited (SEP), for the six months ended June 30, 2021, revenue totalled $19.83 billion compared to the $18.61 billion recorded for the same period of the prior financial year; this represents a 7% increase year over year. Revenue for the quarter totalled $10.25 billion an 8% increase relative to $9.47 billion the prior year.

Cost of Sales rose 19% from $12.10 billion in 2020 to $14.39 billion for the six months ended June 30, 2021. Consequently, gross profit decreased 16% to close at $5.44 billion (2020: $6.51 billion), while the second quarter gross profit amounted to $2.76 billion (2020: $3.76 billion). SEP noted, “The cost of goods has climbed considerably driven by global supply chain challenges which have negatively impacted: Availability and cost of raw and packaging materials. Some key commodities have increased more than 100%; Shipping cost, especially out of Asia, which have increased more than 500% and continues to climb and lastly the working capital requirement has also increased driven by higher prices and by the fact that, where possible, we are carrying more inventory to mitigate against worsening supply chain disruption.”

However, other operating income for the period totalled $178.26 million relative to $217.33 million in 2020, a 18% decline year over year while other operating expenses decreased by 20% to close the six months period at $3.62 billion (2020: $4.51 billion).

Consequently, operating profit fell by 10% to $2.00 billion (2020: $2.22 billion) for the six months ended June 2021. While for the quarter, operating profit contracted by 6% to $1.06 billion (2020: $1.12 billion).

Finance costs totalled $501.02 million (2020: $595.22 million), a 16% decline when compared to the same period last year. The company reported share of results of Joint Venture amounting to $32.23 million relative to $4.97 million reported in 2020.

Pre-tax profits fell 6% to $1.53 billion in comparison to profit of $1.63 billion booked in the same period last year. However, for the quarter, pre-tax profit amounted to $839.66 million relative to $777.95 million booked in 2020.

Taxation of $286.52 million was reported for the six months period relative to $316.05 million booked in 2020. Consequently, SEP, for the period under review, booked net profit from continuing operation of $1.24 billion (2020: $1.32 billion) and net loss from discontinued operations closed at $37.60 million (2020: $16.13 million). As a result, overall net profit was $1.21 billion (2020: $1.30 billion) for the period under review, while for the quarter, net profit closed at $661.02 million (2020: $668.10 million).

The comprehensive income for the six months amounted to $1.29 billion (2020: $1.40 billion.) For the second quarter, comprehensive income amounted to $683.58 million (2020: $743.85 million).

Earnings per share for the six months ended June 30, 2021 amounted to $1.65 relative to $1.77 for the corresponding period in 2020. The EPS for the quarter was reported at $0.90 relative to $0.91 reported in 2020. The twelve months trailing EPS is $3.79. The number of shares used in our calculations is 733,546,855. SEP closed the trading period on July 23, 2021 at $67.52 with a corresponding P/E of 17.83 times.

Management noted that, “We remain cautiously optimistic that, with the imminent arrival of significant quantities of vaccines and the hope that sufficient Jamaicans will become vaccinated, we will begin the process of reducing our risk of a surge in the COVID-19 infection rate. This risk reduction could pave the way for the resumption of schools in September and the further reopening of the rest of the economy. However, we know that the global threat level is significant with the escalation in the Delta strain and, therefore, management will continue to be prudent and assume all existing challenges (supply chain, price increases, etc.) will continue at a minimum for the rest of the year.”

Balance Sheet at a Glance:

As at June 30, 2021, the company’s total assets increased by 7% to $39.13 billion from $36.45 billion a year ago. The upward movement was greatly tempered by a decrease of $346.11 million in ‘Intangible assets’ which closed the period at $9.05 billion (2020: $9.29 billion).

Shareholders’ equity for the period was $17.96 billion relative to $16.37 billion last year. As such, resulting in a book value per share of $24.48 relative to $22.32 last year.

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