US portfolio protected by reducing the amounts invested directly in that market

Durrant Pate/Contributor

The Jamaican Teas Group enjoyed rising sales during the 2022 fiscal year but its performance was dragged down by its QWI Investment Division.

Jamaican Teas experienced continued growth in sales in the September last quarter, which is expected to carry over into the 2023 fiscal year. However, group profits were reduced by a decline in the results of QWI, as well as a continuation of the effects of logistical issues surrounding some raw material inputs.

There are indications that, during the new financial year, QWI will benefit positively from planned changes in tactics and strategies as well as improvements in the investing climate. QWI had a good year in 2021 but faltered in 2022 as a result of the impact of rising inflation and interest rates in Jamaica and overseas, which depressed the value of many stocks particularly US listed stocks as well as some in the Jamaica Stock Exchange (JSE) Main Market.

The Junior Market rose during the year as the reported profits at the majority of junior companies were positive. This benefited the investment portfolio, which has become increasingly weighted toward junior market shares.

Eliminating borrowing on USA portfolio

Action was taken early in the year to protect the USA portfolio by eliminating borrowings as well as reducing the amounts invested directly in that market. This protected the portfolio from more severe losses. During this quarter, the decline in the prices of stocks, primarily in the JSE Main Market and New York Stock Exchange, continued from the third quarter with the strongest declines in the latter.

This resulted in realised and unrealised investment losses for QWI Investments Limited of J$66 million for the final quarter. The expectation is that this adverse trend will be reversed in the new financial year, as inflation rates decline and interest rates peak.

Turning to the performance of the Manufacturing Division, the high point of the fourth quarter was the strong gain in export sales, which rose 40 per cent over the prior year. Growth in this area accelerated over the pace of the earlier quarters of the year.

Exports accounted for 66 per cent of total sales in the quarter. Orders from overseas customers’ point to a continuation of the positive trend in exports in our 2022-2023 financial year.

Domestic sales only increased three per cent in this quarter, a slowdown from trends earlier in the year. Overall, manufacturing sales increased 25 per cent compared with the year ago quarter.

Real Estate Division

There were no real estate sales booked in the quarter this year or the year ago quarter as construction work on the new studios at Belvedere Road in St Andrew is still under way. Construction is expected to finish in March 2023.

Retail Division

For 2022, retail revenues amounted to J$161 million for the fourth quarter, an increase of 27 per cent. This reflects, in part, recovery from the restricted hours of operation imposed on the store in 2021 due to the COVID outbreak, as well as continued growth in this business.

Revenues

Jamaican Teas total revenues for the quarter increased by 25 per cent overall from J$524 million a year ago to J$655 million this quarter. The losses shown in Investment Income mainly reflect the realised and unrealised investment losses of QWI, partially offset by higher dividend income and exchange gains compared with the year ago period.

Fair value gains on the group’s investment properties reversed a fair value loss on these properties in the year ago quarter and resulted in the increased level of Other Income reported. The increases in cost of sales for the quarter and the full year exceeded the growth in revenues, primarily as a result of sharp increases in ocean marine freight rates compared with the year ago periods.

Not all of these cost increases were passed on to customers. Since the year end there has been significant reductions in ocean freight rates, which will improve the company’s cost of sales in 2023.