Lumber Depot posts solid results as construction demand booms
Online services increase by 30%
EVEN as other areas of the economy continue to slowly recover, Lumber Depot Limited is reaping the rewards from the surge in construction demand as the net profits for the company grew by 134 per cent to $36.1 million for the second quarter ending October 31.
While most sectors of the economy experienced declines or lower outputs, the construction sector has remained a force as it grew by five per cent during the third quarter by increses in renovation and developments taking place across the country.
Lumber Depot saw its revenues increase by seven per cent to $338.4 million mainly due to the steep jump in lumber, cement and steel products.
When questioned about the company’s recent performance, Managing Director Noel Dawes touted the focus on maintaining consistent inventory levels and adjusting to the current environment as the areas which delivered the highest level of returns. This was reflected by the 20 per cent increase in revenue for construction items along with a realignment of the business to facilitate greater online services and ability to serve their customer base in the Papine area.
“We have found that through development of relationships, people transition from visiting the store to that type of activity of online business, we’ve had a significant increase of about 30 per cent increase in online services largely because of a health and safety practice with people being more comfortable once they’ve gotten to know us in terms of what services are offered.”
This increase in overall sales and results have seen Lumber Depot’s six months net profit stand 198 per cent higher at $66 million compared to the prior nine months result at $22.2 million. This was the highest after-tax performance the company has generated in their current history compared to their 2018 financials when they were a part of the Blue Power Group (BPOW).
The current six months revenue of $700 million also represents 76 per cent of the nine months revenue of $921.5 million.
Dawes shared that the company could open a new location or create a complementary service that would align with lumber’s services. BPOW still provides lumber with some additional space at another location along with accounting services to the company despite only owning 16 per cent of the company now.
“The board is desirous of that type of activity for growth and development. We are looking towards that with the necessary due diligence, but we are always seeking opportunities which aren’t confined to the hardware sector only,“Dawes said.
Lumber Depot had $57.7 million in cash at the end of the quarter which Dawes says would remain sufficiently large to plan for the uncertainty which still lingers in the current environment. Lumber’s total assets and total liabilities at the end of the period was $434.1 million and $175.8 million, respectively, with shareholders equity standing at $258.3 million.
Based on this solid performance, Lumber declared a $0.02 dividend ($14.1 million) which will be payable to shareholders on January 18. This was the company’s first dividend since listing in December 2019 and would provide some cash to BPOW which took another hit earlier this week from a Caribbean Community (Caricom) ruling, which is expected to significantly impact sales within their Caricombased territories.
Dawes indicated that the company has made some new hires and has planned carefully for possible supply chain disruptions as some orders which took three months to receive are now taking five months and longer to process. There was also a focus to work with customers carefully especially those who utilised receivables and are being impacted by COVID-19.
“We’re in full preparation for the Yuletide season and we expect that we’ll have a big season based on the indicators from the whole macroeconomic sector in terms of employment and customer confidence. We’re cautious about the whole outlook in terms of what it is. Our inventories are in line with expected demand and tend to have additional inventory to meet the unprecedented challenges which may so arise.
“The pandemic has reshaped the outlook of management in terms of what is there in the environment. We work with customers from groundbreaking right until the final lock and key to the finishing of their project. That has been part and is one of the key features in terms of what we strive to achieve with our customers. We try to get the job done right every time to satisfy the customer’s needs. Challenging times brings out the best of us as seen with the resilience of the Jamaican people especially in the construction sector which has continued to grow,“Dawes ended.