Revenues and profit during half-year performance

Durrant Pate/Contributor

Jamaican distribution conglomerate Derrimon Trading has now fully consolidated its two recent local acquisitions, Spicy Hill Farms Limited and Arosa Limited.

The companies were acquired earlier this year with the sale being completed at the start of the second quarter ended June 2022. Based in Trelawny, Spicy Hill Farms manufactures a range of seasonings while the St Ann-based Arosa produces quality local beef cuts, processed meats and distributes fine European food, liquor and equipment for the hospitality and food service segment.

The consolidation has impacted Derrimon’s half-year performance, as new debt associated with the completion of Arosa’s acquisition were brought on the books to fund its J$932 million sale. As a result, the company’s finance costs jumped by J$128.60 million (277.14 per cent) to J$175.015 million.

The six months consolidated results for Derrimon saw revenue of J$8.86 billion, which is J$811.98 million, which is more than the J$8.052 billion reported for the corresponding period in 2021. The improved performance has been attributed to Derrimon’s growth strategy being achieved through its subsidiaries and business segments.  

Subsidiaries such as Caribbean Flavours and Fragrances and Woodcats International maintained adequate sales despite the continued negative impact from the elevated inflation, raw material shortages and delays from overseas supplies.

Group financial outturns

For the half year, the Derrimon Group reported gross profit of J$1.89 billion, which represents an increase of J$357.49 million above the J$1.53 billion reported last year. Despite rising raw material costs, along with higher distribution costs, gross margins improved from 19.11 per cent to 21.39 per cent.

Consolidated operating expenses amounted to J$1.65 billion, representing an increase of J$439.5 million over the J$1.21 billion reported for 2021. During the period Derrimon witnessed from rising costs for several expenses.

The Group’s operating profit for the first half year was J$504.12 million, an increase of J$136.3 million. On the negative side, the financial out-turn was compounded by the appreciation of the Jamaican Dollar against the United States Dollar, which resulted in foreign exchange losses for the period.

Total assets totalled J$12.98 billion compared to the J$10.31 billion reported for 2021. Total liabilities increased from J$4.70 billion to J$6.93 billion while total equity moved from J$5.64 billion to J$6.04 billion.

Notable events during the period included the temporary disruption to our Marnock Retail LLC subsidiary, which underwent a store reset. This was also compounded by supply chain disruptions and inflation during the period. Spicy Hill’s factory was relocated from its Trelawny location to Marcus Garvey Drive and underwent factory upgrade and modernisation in the process.

Core Activity

The Distribution and Retail local arms of the business recorded revenue of J$5.81 billion for the first half of 2022, which is a 6.43 per cent improvement over the J$5.46 billion earned in the prior period. Gross profit from these was J$1.15 billion, which represents a J$288.82 million increase above the $869.39 million for 2021.

Gross margins improved from 15.90 per cent to 19.91 per cent during the six months period, significantly improving our overall performance. Derrimon continues to focus on attracting categories of products that generate specific hurdle returns and increase its distribution effectiveness within the wholesale and modern trade.

Chairman/Chief Executive Officer, Derrick Cotterell is positive on the outlook for the rest of the year saying, “we maintain sufficient levels of inventory at the company and subsidiary levels without overstocking which ties up cash and carries its own inherent risks. Our group treasury team is constantly exploring methods to hedge various risks especially foreign exchange risk (FX) based on the variation in the USD-JMD FX rate”.

Continuing, Cotterell advised: “With the movement in market interest rate, we expect to see the repricing of new debt taking on these new interest rates, which will negatively impact our business. We remain confident that based on the strong working relationships that exist with our bankers and alternative investment partners that we will ensure that capital is available to the Group’s various companies as the needs arise.”