Profits down while revenues are up 5% during March quarter

Jamaican manufacturing conglomerate Seprod is reporting that it has been rocked by massive increases in shipping cost and global commodity prices during the March quarter, which affected profitability, which declined by 14 per cent.

During the first quarter, Seprod reported net profit of J$546.31 million, relative to last year’s $632.72 million.

The management says “the decreased profitability was primarily driven by an increase in our operating costs and by supply chain challenges. We are closely examining our cost structure and are pushing to improve productivity to help offset the higher cost that we have experienced in Q1”.

The decreased profitability was primarily driven by an increase in operating costs and supply chain challenges. In addition, the dairy business was tremendously impacted by the rains in November and December 2020, which caused over $300 million in infrastructural damage and reduced milk supply, all of which impacted the first quarter  performance.

Recovery on the way

However, the company directors and management reports that, “recovery is in progress and we are on track to be back in full production during Q2. International products for our distribution business also had supply disruption driven by global shipping logistics challenges and by the pandemic impact on factories in some supply countries”.

Additionally, the cost base was  impacted by massive increases in shipping cost and global commodity prices, both of which have resulted in higher raw material costs for the manufacturing business units. Seprod Chairman PB Scott and Chief Executive Officer Richard Pandohie emphasised that measures have been put in place to minimise the COVID-19 impact on staff and other stakeholders but these have not only impacted cost but also reduced efficiency.

“We are closely examining our cost structure and are pushing to improve productivity to help offset the higher cost that we have experienced in Q1. On the positive side, we are hopeful that the country will be able to access more COVID-19 vaccines to allow for the economy to ease some of the restrictions currently in place,” Scott and Pandohie advised shareholders in their interim report.

The company’s management and directors say they are hopeful that the positive trends in the US and the UK will translate to a sharp and early recovery of the key tourism sector. The management remains confident that its projections for the financial year will be met or exceeded.

Revenues up by J$443 million

Seprod Group achieved revenues of $9.58 billion, an increase of $443 million or five per cent over the corresponding period in 2020 and net profit of $546 million, a decrease of J$86 million or 14 per cent versus the corresponding period in 2020. Direct expenses increased by eight per cent from $6.38 billion in 2020 to $6.90 billion in 2021, resulting in gross profit declining by three per cent to close at $2.68 billion (2020: $2.76 billion).

Other operating expenses increased by five per cent to close the first quarter of 2021 at $1.86 billion (2020: $1.78 billion). As at March 31, 2021, Seprod’s total assets increased by six per cent to $38.08 billion from $35.81 billion a year ago.

The growth in assets was largely due to increases in Cash and Bank Balances and Receivables, which closed at $3.13 billion (2020: $1.11 billion) and $6.92 billion (2020: $6.13 billion) respectively. However, this was tempered by a 60 per cent declined in Right Of Use Assets, which closed at $398.78 million (2020: $1.01 billion).