Financial performance tops 2016 but company wary of trade war threats, looming molasses supply shortfall
Prospects for the immediate-term fortunes of local rum manufacturers Demerara Distillers Ltd, in the light of what the company sees as a backing away from global free trade is likely to be one of the critical areas of interest, going forward, company Chairman Komal Samaroo says in the recently released 2017 annual report.
While alluding broadly in the “Chairman’s Report” to what he said was “the apparent reversal trend for free trade,” a development which he said had manifested itself in “some western countries” Samaroo’s comment appears to point to what has become the increasing inclination towards a likely global trade war in the wake of United States President Donald Trump’s threatened slapping of tariffs on imports in a move which he says is designed to protect vulnerable American industries but which has sparked controversy amongst some of his closest political allies.
President Trump’s February jibe about trade wars being “good and easy to win” would not have escaped DDL, one of Guyana’s two rum manufacturing giants, given the fact that it is now a leading supplier of bulk rum to bottlers in North America. “Internationally, we will continue to monitor the potential impact of the apparent reversal trend for free trade as some western countries who previously championed this cause, now appear to be resorting to more nationalistic policies.,” Samaroo says,
DDL, meanwhile, according to Samaroo, recorded an overall 8 per cent increase in group revenue, last year, realizing a return of $19.569 billion, an increase of $.460 billion over the 2016 return. Group profits before taxes last year totaled $3.551 billion compared with $2.920 billion for the previous year, an increase of $631 million. Profits after taxes for 2017 was $2.6 billion compared with $2.191 billion in 2016. Samaroo says that shareholders’ funds increased by 13 per cent in the year while net debt to equity ratio at the end of 2017 jumped from 22:1 in 2016 to 13:1 last year.
In his report, Samaroo signaled DDL’s concern over the implications of the recent downsizing of GuySuCo for its molasses procurement plans in both the short and long term. The DDL Chairman hinted at likely immediate molasses supply challenges, pointing out that while projected molasses supplies for 2018 from the three retained estates totals 42,000 tons, the company’s projected distillery requirements for this year is 70,000 tons.
“As a short-term response, therefore, we are exploring,
in collaboration with the Special Projects Unit which has been established under the National Industrial and Commercial Investments Ltd. (NICIL) to manage the divestment and privatization of the three estates, (and the) the possibility of utilizing the standing canes in the fields from the closed estates.” DDL, Samaroo said, is also considering as an option the feasibility of importing molasses in order to bridge the existing supply gap.
And according to Samaroo, the downsizing of GuySuCo and its implications for the liquor operations for the DDL Group vindicates the company’s earlier diversification decision.
While rum remains the ‘core business” of DDL Samaroo also alluded in his 2017 report to the fortunes of the company’s subsidiary, Tropical Orchard Products Company (TOPCO) which controversially lost the Ministry of Education’s School Feeding Contract. He said that while TOPCO, nonetheless, steadily increased its sales on the domestic market it, nonetheless, incurred a loss of $53 million last year, following a loss of $16 million in the previous year. TOPCO, however, has had the School Feeding contract restored for the first three months of 2018 and Samaroo says that the entity, meanwhile, “has been crafting an aggressive expansion plan”: designed to “widen and expand the range of products offered on the domestic and export market.”
Samaroo said that this year DDL will be monitoring closely the actions of those western countries which he said appeared to be reversing the trend of free trade.
The DDL Chairman’s report, however, appeared focused more closely on domestic developments and their implications for the fortunes of DDL, not least the downsizing of GuySuCo by government, a move which he said had triggered the company’s assessment of its molasses procurement plans in both the short and the long term. According to Samaroo, DDL’s projected molasses from GuySuCo’s three remaining estates is 42,000 tonnes, against the backdrop of a projected company demand of 70,000 tonnes.