Jamaican pharmacy chain, Fontana Limited, continues its profitable run in the second quarter of 2022, despite the negative effects of the coronavirus (COVID-19) pandemic.

Revenues for the second quarter ended December 31, 2021, increased to J$1.85 billion, representing an increase of 20.2 per cent over the J$1.54 billion of the corresponding quarter of the previous year. Fontana’s newest store, Waterloo Square in St Andrew continues to show very positive year-over-year growth.

In a period of major disruptions in Jamaica and across the globe, Fontana has been focused on early ordering and careful management of shipping logistics, which has enabled the pharmacy chain to remain fully stocked before and during the busy holiday season. This move has borne fruit for the company, evidenced in the rise in revenues.

Also, Fontana has boasted that all stores have been open for over two years, noting that this 20.2 per cent increase during the quarter can be considered organic growth, not reflecting any temporary boosts. Cost of sales grew by 24 per cent, impacted primarily by an unprecedented 500-plus per cent increase in global container freight charges over the past 18 months caused by worldwide supply chain challenges.

Absorbing some of the rising costs

Recognising the challenges faced by consumers in a COVID-19 affected economy, Fontana chose to absorb a percentage of these unexpected and unavoidable cost increases in order to minimise the impact on customers. As a result, gross profit margin fell from 40.3 per cent last year to 38.7 per cent this year.

Gross profits, however, increased by 15 per cent from J$622 million to J$717 million, mainly attributable to volume growth. Operating expenses increased by 14 per cent to J$392 million, up from J$344 million over the prior year.

Staff costs were the main driver here, as Fontana increased man-hours worked in line with the increased operating hours due to the relaxation of COVID-19 protocols. Despite this, operating profit increased by 17 per cent to J$325 million this quarter.

Finance costs were impacted primarily by the foreign exchange losses recorded in relation to the revaluation of the lease liability (IFRS 16), which resulted in an additional cost of J$36.8 million when compared to the same period last year.

Net profit flat

Net profit for the quarter was flat at J$248.8 million, compared with J$248.6 million recorded in the prior year. This represented $0.20 earnings per share for both periods.

This flat result was primarily due to unavoidable external factors: large increases in freight charges added to exchange rate losses due to the lease assessment under the IFRS16 accounting principle. Total assets at the end of the quarter stood at J$4.8 billion, up from J$3.4 billion in the previous comparative period, reflecting an increase of 41 per cent.

Cash on hand (including bond issue) more than doubled from J$823 million to J$1.72 billion, an increase of 109 per cent, putting Fontana Limited in a solid position to build inventories and finance the upcoming Portmore expansion and warehouse in Kingston.

Shareholder’s Equity grew to J$1.99 billion, up from J$1.69 billion or 18 per cent over the prior year.