Seprod doubles profit in abnormal 2020
M anufacturing and distribution company Seprod Limited got innovative during the pandemic, putting out new products, developing new partnerships, and reshaping aspects of the business. Having cauterised the loss-making side of the operation, sugar...
M anufacturing and distribution company Seprod Limited got innovative during the pandemic, putting out new products, developing new partnerships, and reshaping aspects of the business.
Having cauterised the loss-making side of the operation, sugar, by shutting it down the previous year, the company allowed its creative juices to flow, resulting in a new record high for revenue, and a near-doubling of profit to $3.17 billion, in a snub to the pandemic.
CEO Richard Pandohie couldn’t help but take a victory lap.
“It’s the same consistent narrative all year. We knew that barring anything unforeseen, 2020 was always going to be a good year. The objective now is to make sure that it becomes the new normal,” Pandohie told the Financial Gleaner on Wednesday following the release of the company’s fourth quarter results.
Hit full-on by the COVID-19 pandemic, Jamaica and many countries in the world are living through unprecedented and abnormal times in which populaces have retreated from personal contact to control the virus, with consequential negative outcomes for commerce.
Jamaica’s economy has shrunk at historic rates – as high as 18 per cent in one quarter – amid business failures, a shrunken hospitality sector, a decimated travel market, as well as sales erosions for various companies amid tens of thousands of job losses. The economic contraction was tracking at 10-11 per cent as of last September.
But some companies have been staying above water, Seprod among them. The industrial company has seen its revenue climb 16 per cent to $38 billion, an all-time high, while earnings from continued operations grew 86 per cent to $3.17 billion. Factoring for the loss-making discontinued sugar operations, profit actually tripled from $973 million to $3 billion.
A portion of Seprod’s annual earnings from its continuing operations – about a quarter of it, or $762 million – was a one-off gain from the sale of the former Industrial Sales complex at 107 Marcus Garvey Drive, Kingston, to Eppley Caribbean Property Value Fund, with which it is affiliated. Both entities are members of the Musson Group.
The Industrial Sales operations are being consolidated into Seprod’s so-called logistics campus, or distribution hub, being built out at its Felix Fox Boulevard complex.
“A key element of the way forward is productivity. If we’re going to be competitive in the global village it will call for full focus. That will mean increased digitisation, (and) a lot more technology interfaced with human resources,” said Pandohie. “So if inflation is running at, say, six per cent, then we want productivity gains of at least three per cent, at minimum.”
Seprod’s portfolio of manufactured products spans 12 categories ranging across consumer food and household items, flour, packaged retail sugar, beverages, snacks, oils and fats, a range of dairy products, under brands such as Betty, Chiffon, Pronto, Gold Seal, Butterkist, Serge, Golden Grove, Miracle, Brunswick, Supligen and Swizzle, among others.
Last year, the company rolled out two new flavours of Supligen – cookies and cream, and coffee – and a gluten-free cassava flour. Seprod sourced the raw material for the flour from cassava farmers, but outsourced the production of the flour to a tea and spice-making company called Shavuot, run by Richard Harris and his sons, Joel and Jordan.
“We partnered with Shavuot ... with that company doing the processing,” said Pandohie. The cassava flour is “flying off the shelves so well,” he added, “that they’ve had to introduce a 24-hour operation with increased staff”.
In his outlook for this year, amid his quest to make abnormal profit growth the norm for Seprod, Pandohie once again reiterated that the company is not only looking beyond Jamaica, but beyond the region for additional markets for products such as flour.
“The kind of growth we’re targeting and shareholder value that we want to deliver means that the Jamaican market will not be enough to fulfil our objectives. We’ve already said we regard Caricom as a domestic market, so for exports we are talking about an extra-regional push,” he said.
In the past, the company has indicated that it has a yen for Europe, where it believes the gluten-free flour would find a market. That push is still on, Pandohie said. Otherwise, Seprod has been supplying wheat middling, an intermediary product from the flour mill used primarily as animal feed, to Colombia and Peru.
Seprod currently makes 14 per cent of its revenue from export sales, but expects to grow that ratio to 20 per cent by this year end and to 40 per cent by 2023.
“We’re coming out with some innovations and new product lines that will be really exciting. Please don’t ask what they are, because we’re keeping them close to our chest. One thing for sure, the new financial year will be a great one,” Pandohie predicted.
Seprod recorded trailing losses of $70 million from the discontinued sugar operations, which cut 2020 net profits to $3 billion overall, its preliminary results show.
Comparatively, sugar erased $732 million of profit the previous year, with Pandohie noting that the days of big losses for divisional operations were now behind the company.
Sugar was Seprod’s albatross for a decade. After investing more than $4 billion, beginning in 2009, the company finally exited the perennial loss-making Golden Grove sugar manufacturing operation in July 2019, and is still trying to find buyers for the factory and equipment left behind in St Thomas.