Seprod leases new warehouse after fire, resumes operation
FOLLOWING THE fire which gutted half of its warehousing space, distribution operations, Seprod Limited says its making progress on the restoration of the business that was conducted from the damaged site.
The October 10 fire, the cause of which was being investigated, affected 100,000 square feet of the food distribution facilities of Facey Commodity Company Limited, a Seprod subsidiary, leaving damage estimated preliminarily at $1 billion. The facility was insured.
Seprod has secured sufficient warehousing space to cover the facilities taken out of commission by the fire that can cover what it lost at its Facey Commodity installation. It has struck a deal with the Port Authority of Jamaica, from which it has rented half of a 200,000 square foot complex.
“We’re definitely recovering,” said Seprod CEO Richard Pandohie.
“We’ve now leased a warehouse, equivalent to the size that we lost. That became operational on Thursday, November 4,” he told the Financial Gleaner at the release of the company’s third-quarter financial report.
The company is also is back to making scheduled deliveries, he added.
Pandohie credits the fast pace at which it was able to secure such large facilities to a proactive Port Authority of Jamaica, which had been in the process of developing warehouse space along the waterfront in Kingston and whose leadership sped up the pace to accommodate the manufacturing and distribution conglomerate.
“That happened really fast and for us to be operational now, a lot of credit must go to the Seprod team and the Port Authority of Jamaica. Professor Gordon Shirley reached out the night of the fire and made the offer. We grabbed it and he and his team worked with us to make it operational,” he said. Shirley is president and chief executive of the Port Authority.
Of the 200,00 square foot complex, Seprod has leased 100,000 square feet, including office space. The lease is for one year with the option to renew for three years. The other 100,000 square feet has been fenced off, but Pandohie says Seprod may end up leasing the rest of the space if deemed necessary.
The new distribution facility is five minutes away from the former firedamaged distribution centre, which allows Seprod to avoid logistical challenges that a more distant facility would have created.
“That would i ntroduce a l ot of inefficiencies to our operations – just a lot of complexity to our distribution. The one location with everything has helped us so much,” the Seprod CEO said.
The final damage estimate is yet to be determined.
At the time of the fire Seprod was in the process of building out an upgraded distribution and logistics centre at its Felix Fox Boulevard headquarters, with about $1.3 billion allocated so far towards the improvements, he said. Completion of the project has been set back by six months to March 2022.
Seprod’s year to date financial performance, from January to September, which preceded the fire, the company’s sales amounted to $31.15 billion, up nine per cent year on year, but net profit fell 31 per cent to $1.70 billion, which Seprod attributed to one-off event surrounding a land deal.
If the cost of the land acquisition, $720 million, was stripped from the numbers, profit would only have fallen one per cent, the company said.
BUSINESS COST INCREASES
Also weighing on profit was a $5 billion jump i n direct or production costs for the company, linked to higher commodity, shipping and energy costs. Pandohie says, however, that Seprod has chosen not to burden customers with the full increases i n its cost of doing business.
“We’re in this for the long run, having been in business for 90 years,” he said. “That is why at times like these when we take a hit, we decide to cushion the impact on the consumer and not to pass it on.”
The company has also seen signs that costs might be ameliorating, saying, for example, that its shipping costs related to cargo out of Asia has fallen from about US$18,000 per container to US$16,500, and that the company’s gross margins should improve in the periods ahead.
“These results that you see for Seprod are in the heights of the pandemic, with dramatic increases in commodity prices.
Shipping is also coming down and, indicatively at least, it’s going in a direction that makes us feel optimistic,” Pandohie said.
That optimism also relates to new opportunities around product sales, he said, noting that Jamaica has become more competitive as a nearshore producer.
“A lot more companies in the United States and Canada are looking to us for products since they now have gaps and spaces on their shelves. We are making sure that we take advantage of those opportunities,” the Seprod CEO said.