Seprod profit hit by economic drought, sees sunshine ahead
Sabrina Gordon, Business Reporter
For Seprod Limited, the results from its first quarter performance have been far from sweet, but the top man at the company is sure he can spin new profit from sugar cane in the months ahead.
Seprod's 41 per cent drop in net profits at March 2010 reflects the tightness in the economy, leading to mixed financial results, said managing director Byron Thompson.
"But we have the newly acquired business in Golden Grove and while we were off to a late start with the crop and was also affected by weather conditions, as the months roll on, we expect to pick up, start producing and selling sugar," Thompson said Tuesday.
"So we expect to have some sort of rebound," he told Wednesday Business.
Seprod, along with Fred M. Jones, last year acquired the St Thomas Sugar Company from the government and have so far injected US$5 million into an upgrade of the facility, which the company is now banking on to boost earnings.
For the quarter ended March, Seprod's net profits dropped to J$268 million on marginal growth of 7.4 per cent in revenues which totalled $2.7 billion.
Seprod's net profit for the corresponding period in the previous year amounted to J$456 million.
While Thomspon did not give a break-down, he said that the two main factors accounting for the reduction in company profits came from its US dollar denominated instruments taking a hit on translated gains, as the Jamaican dollar regained some strength against the greenback; and a reduction in interest income earned due to the Jamaica Debt Exchange domestic bond swap.
Seprod recorded a net foreign exchange loss of J$34.5 million for the quarter, compared to gains amounting to J$208 million for the same period in the previous year.
Quarterly gain
The manufacturing and distribution company also had a quarterly gain of J$20 million on stock investments, coming from a loss position in the prior year.
Seprod's business spans the manufacturing and distribution of edible oils and fats, corn products and other household consumer products. It's brand of products such as Chef, Butterkist, Chiffon, Serge among which others occupy prominent place on the shelves of supermarkets and wholesales establishments.
The manufacturing segment grew revenue by J$300 million to J$1.8 billion, but gave up operating gains to close the quarter at $350 million, down from $422 million.
Distribution income fell by J$99 million to J$848 million, as did its contribution to operating profit, which declined from J$70 million a year ago to J$54 million in the current review period.
The results, though mixed, favoured the more lucrative revenue spinner, prompting Thompson to comment that Seprod, in this quarter, managed to weather the storm.
"In both areas, distribution and manufacturing, we are having out-turns a little below expectation. They were less buoyant than previous years, but we do expect things to pick-up," he said.
"It is challenging to manage now but when everything is considered we have been weathering the storm. In a few instances we have had to sacrifice margins in order to maintain market share but it's not new to us and we are working hard."
According to Thompson, drought conditions in the island also affected other areas of the company's operation, including the dairy business.
"It impeded milk production, animals were challenged, and there was a shortfall in that area as the cows coming into milk were below what was expected," he said.
Serge Island Farms, one of Seprod's seven subsidiaries, produces about 40 per cent of Jamaica's milk supply from its base in St Thomas, according to the company's website. It is also the main supplier of raw milk to Serge Island Dairies, the manufacturing arm of the operation.