Domestic sales declined by 14%, primarily the result of shortages of certain raw material

Jamaican Teas is reporting mixed results for its second quarter ended March, which saw a reversal of losses in the corresponding quarter in 2020 and contraction in domestic sales.

In total, the manufacturing and real estate outfit says its “second quarter results reflect a good performance but with some moderation of the strong trends seen in the first quarter. Since the end of the quarter, the Group continues to record strong sales on both the export and local markets and increased gains in your investment company”.

However, the manufacturing operations had mixed results with sales improving 26 per cent to $406 million and an increase in export sales of 56 per cent over the prior year. This was a deceleration from the 88 per cent growth rate in the first quarter.

Exports accounted for 70 per cent of total sales in the quarter. With domestic sales declining by 14 per cent compared with the prior year.

“The declining local performance was primarily the result of shortages of certain raw materials arising from disruptions in shipping services from our suppliers which resulted in items being out of stock. As a result, we were unable to meet all our domestic orders,” the directors advised shareholders in their just published March quarterly report.

Reversing losses made in the previous quarter

Net profit attributable to Jamaican Teas for the quarter was $82 million, a strong reversal from the $47-million loss in the corresponding quarter of the previous year. For the half year, net profit attributable to Jamaican Teas was $198.3 million, a strong reversal from the $19-million loss in the previous year.

Revenues for the quarter increased by $135.3 million to $608.5 million. Some $67 million of this increase arose because in the year ago quarter real estate sales had not commenced at Violet’s View. Sales at the supermarket subsidiary decreased by 11 per cent.

This was a direct result of operating restrictions on store hours due to longer curfews on the island, as compared with a year ago when at least two months of the quarter were not affected by school closures and other COVID-related restrictions. The increase in Investment and Other Income this quarter mainly reflects a reversal of the unrealised investment losses of its investment subsidiary, QWI, a year ago.

For the half year, the 35 per cent increase in sales reflects a 70 per cent increase in export manufacturing sales, a three per cent decrease in domestic manufacturing sales, an eight per cent decrease in supermarket sales compared with last year and the completion of sales of the remaining Violet’s View apartments that were not accounted for in the 2020 fiscal year. There were no sales of real estate units in the comparative period last financial year.

QWI recovering from heavy unrealised losses

The reversal in the Investment and Other Income from a $610-million loss to income of almost $240 million, primarily resulted from a recovery from the heavy unrealised losses that QWI experienced in its shareholdings in the second quarter of 2020 caused by the onset of COVID-19 and its impact on stock prices.

During the quarter, the improvement in the prices of stocks on the Jamaican and New York stock exchanges continued. This has resulted in investment gains for QWI Investments, resulting in a net profit of $79 million this quarter and $171 million for the six-month period. The management expects to see a continuation of this trend in the second half of the financial year.

Expenses

Cost of Sales increased in the quarter and half year and largely matches increases in revenues as well as the effects of booking the cost of the real estate units sold in the period. The real estate development has lower profit margins as compared with the manufacturing division.

The manufacturing division experienced some cost pressures from increased freight costs and raw material price increases that were not passed on to customers. The decrease in sales and marketing expenses for the quarter and half year primarily reflects the curtailment of some of its Jamaican Teas overseas marketing activities due to COVID-related travel restrictions.

The increase in interest expense during the quarter resulted from higher borrowings at QWI. For the half year, the decrease in interest costs is mainly a result of lower borrowing rates at Jamaican Teas in the first quarter compared with a year ago.