Net profits affected by supply chain disruptions and unprecedented increases in raw material prices
Blue Power Group delivered outstanding growth in sales volumes and revenues for the quarter ended January 31, 2023, in line with its plan to develop and diversify its customer base.
The Group earned revenues of J$194 million, up 43 per cent relative to the prior year and profits of J$13 million, up 44 per cent relative to the prior year. Blue Power generated revenues of J$633 million and earned net profit of J$29 million for the nine-month period ended January 31, 2023.
The Group delivered outstanding growth in sales volumes and revenues, in line with its plan to develop and diversify its customer base. Net profits for the year-to-date were adversely affected by disruptions to the supply chain and unprecedented increases in raw material prices.
Supply chain issues normalising
Company Chairman Jeffrey Hall reported that “these conditions are normalising and, with the growing sales and increased attention to efficiency and innovation, the operating performance of the enterprise is now steadily improving”.
Revenues grew 83 per cent for the year-to-date, relative to the same period in the prior year.
Said Hall: “We experienced revenue growth in all of our main product categories, including our bath soap lines, specialty soaps and our laundry soap business. Revenue growth came from existing and new customers and saw the group gaining market share locally and re-enforcing its reputation as a leading private label manufacturer in the region.”
There were one-off gains on the sale of property and investments during the prior year (amounting to approximately $171 million) but was not repeated this year. Moreover, this year gross margins suffered as a result of dramatic increases in raw materials prices, challenges to the actual availability of products from some of our sources, and a spike in logistics costs (particularly for raw materials originating in Asia).
Hall reported that the market for vegetable oils – a basic input in soap production – was also disrupted in the early part of the year due to the war in the Ukraine. The combined effect of these challenges was a reduction in year-to-date net profits relative to the prior year.
An important part of Blue Power’s plan for profitable business growth is its commitment to efficiency, innovation and customer development. During the quarter the company continued to undertake capital projects and make improvements to our procurement arrangements, quality systems, labour efficiency, production facilities and product line.
The company chairman indicated that, “we began to see the positive results of these initiatives in the third quarter and expect this to continue and gather momentum in the financial year ahead”.
He added: “The Blue Power Group balance sheet, investment portfolio and liquidity remain strong. This has allowed us to increase our inventory levels to manage some of the supply chain disruptions. We expect to be able to liquidate these inventory levels as supply conditions improve.”
He pointed out that Blue Power’s investment in Lumber Depot Limited, which is a significant part of its holdings, performed satisfactorily during the year but nevertheless faces short-term challenges associated with the impact of higher interest rates on construction activity in Jamaica. As such, Blue Power’s management continued to be optimistic about the competitive position and growth prospects for the business in Jamaica, as well as the opportunity to develop new export markets.
The company said it was also well prepared to diversify the business through opportunistic investments in related businesses and in our real estate.