Jamaican Teas profits cooled
JAMAICAN Teas reported that its net profit for its second quarter, January to March, dipped 21 per cent to $87 million. Profits for the six months to the end of March were also lower, falling 13.6 per cent to $171 million compared to $198 million a year.
“There are a few things which stand out,” John Mahfood, CEO of Jamaican Teas, told the Jamaica Observer in response to queries about the result.
“Number one, we didn’t have any real estate sales this year and we had some last year. The development project that we have in Belvedere will be completed later this year. We have started selling but cannot record the profit until the project is complete. Those are 30 units and I suspect we will start seeing the results of the sale in probably the last quarter of this year, but more likely in the first quarter of next year,” he explained.
Mahfood also pointed to less than stellar results in QWI, a company in which Jamaican Teas holds a 40 per cent stake. During its second quarter, January to March, QWI reported its profit fell by a half to $38.6 million. For the full six months to the end of March, QWI Investments – the company whose principal activity is holding and managing investments in quoted securities – reported profit of $121.7 million. That was down 28.7 per cent with strong gains in the first quarter helping to offset some of the declines in the second quarter.
“[QWI Investments] results were not as good as the previous year’s first half and that’s because primarily the US stock market didn’t do very well and the main Jamaica stock market didn’t do all that well, it in fact declined. So while QWI made a profit and did better than the main Jamaican stock market, it didn’t do as well as the previous year so that impacted on the first half results,” Mahfood reflected.
During the period, QWI realised gains of almost $37 million, mainly in the Jamaican stock market. The company’s Jamaican portfolio produced unrealised gains of $156.8 million versus $191.6 million a year ago. The 18 per cent decline in investment gains were due to the lower price performance of some leading Jamaican stocks in the portfolio, it said in its quarterly filings. On the other hand, its USA investment portfolio resulted in unrealised losses of near $10 million during the period. This performance pushed investment gains for QWI to $184 million. There was also an unrealised exchange gain of $24 million compared to a loss of $12 million in the year ago period.
Already, QWI has warned investors that “sharp increases in inflation and interest rates now taking place could impact the prices of investments and securities negatively over the next two years.”
Impacting Jamaican Teas’ results as well was the lower margins on its teas. The margins on the manufacturing division of the company declined by about eight per cent due mostly to the increase in shipping and raw material costs as a result of the external factors.
“The price increases that we got in 2021 from suppliers and the increased costs of transporation rose faster than the increase in our selling prices and as a result it squeezed the margins significantly and now we have to look at how we make up for some of those increases,” he added as he hinted at price increases to come for some of the teas produced by the company. New products are to be added as well.
“We set up a new manufacturing location and relocating our soup division and dry seasons division that we started a few years ago. Now we are relocating it and expanding it to another location. That will be completed at the end of May which will allow us to expand production in that area and we have a number of new products in that area. We have a number of new products in the pipeline that we will put on the market soon. We have about six or seven new products that should contribute to the improvement in sales,” an optimistic sounding Mahfood told the Business Observer.
“So our outlook for the next quarter and the final quarter, we expect to be better than the previous year because the sales are strong and we have our stock. We have a high level of inventory which we did purposely to ensure we don’t run out of raw materials and we can meet our customer demand. Our export earnings will be strong in the second quarter of the year and we will make up some of the deficit that we incurred in the first half of the financial year. We are optimistic for the second half.”
Mahfood said the supermarket division of the company has been performing well with sales rising 30 per cent in April compared to the previous year.
“It’s not a big contributor to the profit but at least that is a positive indication that business is returning and people are spending money again. I use the supermarket as a guage because it caters to middle income and lower middle income people and those people were pretty badly affected during COVID.”
Exports are also performing better than expected. In April export shipments were 39 per cent higher than in Apr 2021 and export shipments for the seven months to April exceeded the comparable year ago period for Jamaican Teas.
“Markets such as Barbados and in particular Guyana which is having phenomenol growth in their economy because of oil which is contributing to our improvement,” he concluded.
At the end of trading on Monday, Jamaican Teas shares were being sold for an average $3.52. This is down 7.6 per cent since the start of year. At the current price, Jamaican Teas has a market capitalisation of $7.57 billion.