Despite rising inflation, supply chain challenges, war in Europe and an uptick in interest rates, Jamaica Producers put in a creditable performance in 2022 which served as a precursor to its amalgamation into the Pan Jamaica Group.
Speaking at its AGM held at the Marriott Courtyard Hotel in New Kingston on Friday (June 16), both chairman Charles Johnston and CEO Jeffery Hall explained why Jamaica Producers took the decision to transfer its core operating businesses to PanJam in exchange for a 34.5 per cent interest in the combined enterprise renamed the Pan Jamaica Group.
Reporting on Jamaica Producer’s financial performance for the year 2022, it is clear that it is more than holding its own particularly in what will be a transition year.
As it currently stands there is a 50/50 split between its businesses as a revenue line between the Americas and Europe. As much as 80 per cent of the revenues from its ‘Food and Drink’ division came from Europe. While many of us here in Jamaica touch and feel the products it sells in the Caribbean, the bulk of the revenue comes from Europe.
From an asset perspective, the majority of those are located in the Caribbean with 86 per cent concentrated in logistics and Kingston Wharves and 14 per cent in Europe, driving the ‘Food and Drink’ revenue line.
What is of note here is that the earnings more or less match that asset story.
For the year 2022, Jamaica Producers increased profit attributable to shareholders by 25 per cent to J$2.3 billion and benefited from a 16 per cent increase in revenues to $29 billion despite increases in raw materials and energy costs. Admittedly, there was some margin compression. Earning a consolidated profit of $4 billion, the group was able to increase its dividend pay out by 20 per cent.
Hall announced that Jamaica Producers has tripled shareholders’ equity (primarily tangible assets) in the last ten years, quadrupled revenues and increased profits ten fold in that same period.
Total assets came in at $47 billion although there was some capital expenditure for plant and equipment. Cash and cash equivalent was still available to Jamaica Producers at $12 billion. The asset base grew by 5 per cent with manageable leverage of an 11 per cent debt to equity ratio. Capital expenditure continues to drive growth.
Jamaica Producers has managed to grow dividends by 50 per cent since 2020 and market cap now stands at $25 billion with shareholders’ equity of $19 billion.
There has been a continuous trend of recovery from the COVID-19 pandemic while maintaining growth into Q1 which saw revenues growing at two per cent and EBIT now at nine per cent. Shareholders profit grew year on year to $439 million with shareholders’ equity of $19.9 billion.
Amalgamation with PanJam
There has been much discussion about Jamaica Producers combining with PanJam. One shareholder at the AGM said that Jamaica Producers was doing well in its own right and he couldn’t see the need to merge.
Hall outlined three broad categories of assets as a result of ‘getting into bed’ with PanJam that will bolster both its performance and earnings
- Its 34.5 per cent interest in the Pan Jamaica Group which has a market cap of $81 billion. The shareholders’ equity of the combined groups is $77 billion and with 34.5 per cent share of that there is a strong underlying asset with value in the Pan Jamaica Group.
- Landholdings: Jamaica Producers has 3,500 acres of land in the parish of St Mary making it by far the largest landholder there.
- Treasury position: $1.5 billion of cash and short-term investments largely in fixed term investments.
“We believe the Pan Jamaica Group is a good place for our equity operational assets We want exposure to Jamaica and underlying commercial opportunities that are available. We believe the Pan Jamaica Group represents a place to get that exposure because it is diverse and well run. Our landholdings and treasury position support that position.
“Why do we feel so good about about the Pan Jamaica Group?”
“It has identified four strategic pillars namely:
- Investing in property and infrastructure
- Specialty food: Niche market position
- Financial services
- Global services
There are a lot of recognisable names in each of the four strategic sectors,” said Jamaica Producer’s CEO Jeffery Hall.