Wary of bad debt, FosRich adjusts credit terms
FOSRICH COMPANY Limited has adjusted its credit terms for some customers and implemented a seven-day limit for payment of goods bought on credit across several of its business lines to lower its risk of impairments.
The lighting company, which on Tuesday confirmed the write-off of trade receivables for four companies since the start of the year, after taking steps to recover balances owed to the company, including the confiscation of assets, says it’s now keeping a close eye on balances that are 180 days overdue.
Its average credit limit is 30 days, but FosRich allows longer credit terms for its business-to-business customers.
“We continue to manage our receivables. We have a team that is focusing on the longer-dated receivables, while keeping their eyes on the current ones to prevent them getting into the past-due category,” said FosRich Chief Financial Officer Peter Knibb at the company’s annual general meeting on Tuesday.
“Since COVID-19 set in, we have revised our credit strategies and there are some products that we sell only for cash now; and whereas we gave 30-45 days on most of the items, we have some items that we need to collect on within seven days of sale,” the CFO said at the meeting that was live-streamed.
Since the end of December, FosRich, which distributes lighting and energy products and manufactures PVC pipes at its plant in Kingston, has seen a $31-million increase in receivables to $344 million at end-June.
Sales have been growing despite the pandemic, but so have operating expenses and debt-servicing costs, leading to smaller profit. The company earned three cents per share in the June quarter, down from six cents the year prior, while half-year profit, at four cents per share, was a third of the earnings of 12 cents per share achieved at HY2019.
Sales in the second quarter grew by $40 million to $408 million. Sixmonth sales grew 15 per cent to $857 million.
COVID-19 was also partially blamed for the halt on construction work of FosRich’s planned 30,000-square-foot distribution centre to be built at 76 Molynes Road in Kingston.
“We held back a little to see what was happening in the economy, but we have started that construction and we are going to be occupying ... the warehouse by February 2021. We hope to move into the second phase, which is the build-out of the superstore for our customers by December 2021,” Foster told shareholders.
The superstore and distribution centre together will span 110,000 square feet.
FosRich needs additional storage space, following its expansion into the manufacturing of PVC pipes last year and, more recently, its diversification into transformer repair with a four-year renewable contract with power utility Jamaica Public Service Company. The repair of over a thousand transformers yearly will be done from a 120,000-square-foot plant in Hayes, Clarendon.