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Jamaican distribution company, Derrimon Trading Company Limited is reporting modest growth in profits and revenues for the half year period ended June 30, 2021 in spite of the many challenges faced.

Growth in both profits and revenues was in the high 20% region. The improved performance is attributable to the aggressive implementation of revenue growth strategies employed by all companies and business segments within the Group; namely manufacturing, distribution and retail.

Despite the negative impact of the COVID-19 measures, logistical challenges, raw materials shortages and delays from overseas suppliers and partners, total revenues increased, resulting in year over year improvements. The retail segment comprising the Sampars Outlets, Select Grocers and Foodsaver New York, reported a 78.80% increase in revenue to $4.19 billion over the corresponding six months period.

This result reflects the integration of Derrimon’s New York operation (Marnock LLC), which contributed positively to the results. The distribution segment experienced a 3.06% reduction in revenue to $3.27 billion, which is commendable considering the ending of the contract with SM Jaleel at the beginning of the second quarter.

Caribbean Flavours and Fragrances Ltd (CFF) and Woodcats experienced a 1.25% increase in revenue to $598.51 million.

Group profits up 28.29%

The Group reported gross profit of $1.54 billion which represents an increase of $339.31 million or 28.29% above the $1.20 billion reported for the comparative period last year. Consolidated operating expenses for the six -month period was $1.21 billion, representing an increase of $247.53 million or 25.63% over the $965.76 million reported for the same period in 2020.

The consolidation reflects increased operation expenses, which includes electricity, lease payments, salaries, rent and costs associated with the depreciation of the Jamaican Dollar and the expenses associated with the new USA subsidiary. Derrimon continue to achieve a reduction in quarterly cost of debt given the planned reduction in the debt portfolio at the end of the first quarter.

The finance cost for the six months was $46.41 million which was $21.38 million or 31.54% below the $67.79 million reported at the end of June 2020. The company will utilize debt as deemed necessary in the future for specific projects but will continue on the path of fully liquidating its maturing debt.

Revenues grew to $8.05 billion

Revenue of $8.05 billion was booked for the half year, which is $1.75 billion or 27.76% more than the $6.30 billion reported for the corresponding six month period in 2020.

In their half year report to shareholders, Derrimon’s directors report that the company, “is poised to not only surpass its 2020 earnings, but also to deliver on the projected net profit outlined in the APO (Additional Public Offer) prospectus, as the company has already achieved 59% of the projected result of $485.41 million. The consolidated total assets less current liabilities were $8.11 billion compared to the $4.18 billion reported for the corresponding period in 2020.”

This was achieved largely by a reduction of short-term loans and the consolidation of Marnock LLC.

Operating expenses going up

Operating expenses for the six month period was $1.10 billion, which was an increase of $230.76 million (26.58%) above the $868.09 million reported for the comparative period. For the second quarter ending June 30, 2021, operating expenses was $578.12 million, representing $132.80 million (29.82%) above the expenses incurred for the similar period in 2020.

The major factors for this increase include increases in lease payments, the depreciation of the Jamaican Dollar to the United States Dollars, trucking and delivery charges plus costs associated with the APO executed in February 2021.

Finance charges from core activities amounted to $46.41 million, which is down by $21.38 million (31.54%) from the $67.79 million reported in June 30, 2020.

For the quarter ending June 30, 2021, the finance cost was $23.94 million, which was $5.45 million (29.50%) above that reported for the similar quarter in 2020.

Long term debt was cut from $1.78 billion to $1.26 billion as a result of the APO proceeds.

Despite the spike in shipping costs, supply chain disruptions and various logistical hurdles, Derrimon achieved significant increases in sales and profits.

The continuing depreciation of the Jamaican Dollar is of concern; hence the launch of Marnock LLC is not only timely but also important in our exchange risk mitigation strategy.