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Investment division faltered in 2020 afte bumper 2019

The Jamaican Teas Group ended its 2020 financial year on a high in September, posting rising sales in the fourth quarter which countered the massive losses chalked up in the year by its investment subsidiary, QWI.

Total group revenues for the quarter increased by a robust $502 million from $285 million to $787 million. This increase includes $129 million generated in 2020 from its retail business.

There was a 70 per cent increase in sales, including a 49 per cent increase in export sales and a seven per cent rise in domestic sales. These positive performances countered the reversal in investments and other income from $553 million in 2019 to a loss of $433 million in 2020.

This primarily resulted from the heavy unrealised losses QWI experienced in its shareholdings in financial businesses during the second quarter, due to COVID-19 and its negative impact on many business operations. The increase in cost of sales for the quarter and full year largely matches the growth in revenues.

However, lower administration expenses for the quarter were largely due to reduced expenses at QWI. The fall in interest expense during the quarter resulted from lower borrowings at QWI.

For the full year, the increase in interest costs is mainly a result of higher borrowings at QWI in the first half of this period, compared with the first half of the prior year.

NET PROFIT DOWN 27%

Net profit attributable to Jamaican Teas for the quarter was $131 million, a decline of 27 per cent from the $180 million profit in the corresponding quarter of the previous year. This decline in profit arose from lower stock market gains in the investment portfolio in the 2020 fourth quarter versus that of the previous year, which was a very strong one.

The decline was partly offset by higher profits from the manufacturing operations, as well as profits from the real estate division. For the full year, net profit attributable to Jamaican Tea was $210 million, a decline of 47 per cent from the $400 million generated in the previous year.

Despite the challenges with QWI, the directors of the company point to certain positive indications which should result in a better financial out-turn during the first quarter of the new financial year in 2021. They say the group will benefit from plans and strategies implemented during earlier periods.

QWI FALTERED IN 2020

While the investment division operated through QWI Investments had a bumper 2019, it faltered in 2020. This was as a result of the impact of COVID-19 on the economy, which depressed the local stock market as well as the value of stocks worldwide.

Share prices in these markets have only recovered partially to date. QWI Investments, which returned the poorest performance within the Jamaica Teas group, showed vast improvement during the fourth quarter in September 2020.

This was due mainly to the fact that prices on the Jamaica and New York stock exchanges continued to show improvement over the depressed prices in the March quarter. This resulted in investment gains for QWI Investments of $31 million for the quarter.

The board of Jamaica Teas group expects that this trend will continue into the new financial year.

MANUFACTURING DIVISION

The highlight of the quarter was the manufacturing division, which returned strong gains in export sales, which rose 65 per cent over the prior year. This acceleration in the growth rate was seen up to the third quarter.

Exports accounted for 65 per cent of total sales in the quarter, meeting one of the objectives set at the time the company went public in 2010. Early indications and feedback from overseas customers point to a continuation of the positive trend in exports in the 2021 financial year.

Although exports were dominant, domestic sales did well against the background of a slow growing economy that suffered a sharp fall in the second half of the fiscal year. With strong and continued focus on the domestic market, local manufacturing sales increased 17 per cent compared with the previous year.

Overall, sales climbed 44 per cent to $407 million in the final quarter of the year.

REAL ESTATE AND RETAIL DIVISION

The year was a successful one for the real estate division, which completed the development of Violet’s View Manor – studio units in the Manor Park area – and signed agreements for the sale of 17 of the 18 units. The proceeds and profits from 12 of these units are included in the fourth quarter with the balance to be reflected in the 2021 financial year.

The project was a profitable one. As for the retail division, it recorded revenues of $129 million for the fourth quarter. The year-to-date revenues amounted to $538 million with the board declaring that, “the division remains profitable and a critical asset of the group”.

DDP