Lasco companies migrate to Main Market
TWO affiliated companies Lasco Manufacturing (LASM) and Lasco Distribution (LASD) will migrate to the Main Market of the Jamaica Stock Exchange (JSE) on March 27, one year after breaking the $500-million ceiling on share capital for junior stock market companies.
The two companies have been paying fees applicable to the Main Market since last year. All three affiliated companies were listed on the in October 2010, which means their tax benefit expired on October 11, 2020, making them liable to pay the full corporate income tax rate, whether they remain on the Junior Market or not.
Up to June last year, the Lasco Group has not made a decision one way or the other, but the announcement to migrate the two companies to the Main Market follows the appointment of consumer food industry veteran James Rawle as chairman for all three Lascoaffiliated companies — LASM, LASD, and Lasco Financial Services Limited (LASF).
As at December 2023, LASM had issued capital of $563.1 million while LASD had $513.1 million. However, sister company LASF remains well within the limit set by the JSE at $114.5 million.
LASD and LASM’S migration marks the fifth and sixth firms to graduate to the Main Market since its formation in April 2009. The graduation offers a path for companies to raise additional equity capital, but it also reflects the growth of the businesses.
Both LASD and LASM are the largest firms on the junior market in profitability and market capitalisation and as such, the migrations are expected to reshape the Junior Market. LASM’S market capitalisation was $20.13 billion on January 31 or 10.94 per cent of the Junior Market’s index at $184.03 billion. Meanwhile, LASD was worth $13.61 billion or 7.40 per cent.
Fontana, Fosrich and FESCO are the three largest companies behind the two Lasco giants in terms of market capitalisation. It is unknown which firm will be the largest Junior Market company after the migration in March, but the number of companies on the Junior Market will be reduced to 46, excluding any new listings by then.
The announcement of migration comes amid LASM and LASD recording double-digit increases in profits for the third quarter ending December 31, 2023, despite external disruptions.
In the just-released quarterly reports, the companies noted that they have been closely monitoring the impact of the rapidly evolving geopolitical conflicts and the climate-related impacts on transit via the Panama Canal. However, the businesses were said to have made “tactical decisions” to navigate the headwinds in the short term while adhering to its well-established strategic
framework over the long term.
“We, therefore, continue to take appropriate mitigatory measures to minimise disruptions to our operations,” the companies, which are both chaired by James Rawle, stated in the discussions section of the financial statement.
The larger company, LASD, grew profits 17 per cent year on year to $404.3 million on revenues of $7.3 billion. Meanwhile, profit of LASM jumped by 17 per cent to $568 million on revenues which also grew to $3.2 billion.
For the nine-month period up to December 2023, profit of LASD climbed 28.7 per cent to $1.2 billion, while LASM’S profit swelled 25 per cent year on year to $1.7 billion. LASD makes more revenue than its sister company, but it also has higher operating expenses.
Managing director of LASD John De Silva said the company racked up 12.3 per cent more in expenses over the nine-month period of 2023 when compared to 2022, largely on increases in sales and promotional investments as well as certain structural costs including security and insurance premiums.
“The operating expense ratio was 12.2 per cent of revenue, 10bps above the previous year,” he said.
LASD, however, recorded growth in at least two of its business divisions — nutrition, food and beverage, and the hygiene division which carries home and personal care items.
“We have seen the benefits of some recently executed packaging redesigns and additions to the children’s nutrition portfolio which has also contributed to the strong results,” De Silva said in the preamble to the financial statements.
He added that the health care or pharmaceutical division experienced supply chain disruptions which impacted the top line.
“The expectation is that this situation will improve in the fourth quarter,” the MD said.