Durrant Pate/Contributor

Publicly traded baking company, Honey Bun has dropped profits during the June quarter owing to, among other things, the end of its tax concession from being listed on the Junior Market of the Jamaica Stock Exchange (JSE).

The 10-year tax concession ended last year and, as a result, HoneyBun is now paying its full tax liability as of this year. The 24 per cent decline in net profits, which is down to J$49 million was also attributable to the continued rise in cost of sales.

The company’s margins declined for the quarter, due to continuous global price increases in key ingredients from suppliers mainly due to supply shortage and shipping challenges. Flour prices increased again in late April.

Gross profit for the quarter came in at J$292.7 million or five per cent over prior year, whilst the gross profit ratio closed at 37 per cent compared to 49 per cent in the prior year. The decrease in gross profit is attributable to the continued increase in cost of direct raw material.

Big sales improvement

Sales for the quarter amounted to J$789.4 million or 39 per cent more than last year. ‘Total Sales’ for the first nine months was $2.16 billion, which is 39 per cent better than prior year.

The first nine months of the year saw the company generating net profits of $138m. This result was 22 per cent below prior year. Honey Bun CEO Michelle Chong reports that, “investments made in our distribution channels continue to yield significant contribution to revenue growth, as our products become more easily available island-wide.”

Year-to-date the company has invested J$90.7 million in property plant and equipment and intangible assets in its continued focus on improving manufacturing technologies and expanding our distribution network. Significant expenditures were made to acquire additional distribution vehicles and software/business intelligence upgrades.

Receivables and payables rising

Overall receivables increased by J$116 million to close at J$197.3 million, whilst overall trade and other payables increased by J$52.1 million to close at J$253.4 million. The increase in receivables is a reflection of HoneyBun’s growth strategy, as J$73.8 million of this amount relates to deposits on production machinery and raw material orders.

Other prepayments and interest receivable on investments closed at J$9 million. Net trade receivables stood at J$97.9 million representing 16.5 days of sale, in comparison to prior year J$60.5 million, representing 14.2 days of sale.

A positive indicator is that despite the growth in receivables and payables, net current assets closed the period at J$432.5 million, or 25 per cent over the prior year. As a part of its commitment to shareholders, the company distributed an interim dividend of J$12 million in June, despite the increasing working capital and capital expenditure requirements.

In the area of corporate social responsibility (CSR), activities carried out by Honey Bun during the quarter included its “Donuts for Nurses” programme in May, which was held for a fourth consecutive year. This campaign saw over 30 hospitals and health centres benefitting from the activation.