Preliminary 2021 first quarter results looking good

Early indications are that the November 2020 three-to-one stock split at Jamaica Teas has now increased the liquidity of the stock, even as the price has increased since the just over two month-old issue.

As such, the stock split has achieved the intended objectives in terms of increased liquidity and publicity. On November 30, 2020, the shares were sub-divided into three units for each stock previously held, having been earlier approved by shareholders during an extraordinary general meeting three weeks before.

The split adjusted the share price of Jamaican Teas, which was $2.06 at the end of September 2019, $1.55 at September 2020 and $1.97 at the end of December 2020. At last trading on Friday, the stock was up $0.04 to $2.90 with 704,077 stocks traded on that day.

This stock split is the third since Jamaican Teas listed on the Jamaica Stock Exchange in 2010, resulting in over 2.2 billion shares in issue.

Preliminary outlook for 2021

Preliminary results for the first quarter of the financial year 2021 show that manufacturing revenues increased 46 per cent over 2020, primarily as a result of an almost doubling of manufacturing exports. The rate of sales decline at its supermarket subsidiary has slowed progressively to less than two per cent in December 2020.

Notwithstanding the strong export growth, Jamaican Teas says it will continue efforts to accelerate its domestic tea sales and export business for the remainder of the 2021 financial year and beyond. In 2020, Jamaican Teas’ export sales increased by 48 per cent compared with 2019.

This was mainly due to the increased sales of distributors to their customers in the United States and most of its Caribbean customers. Local sales increased by seven per cent in 2020.

Some of this was driven by the effects of COVID-19, which resulted in many people being confined to their homes from where they had to work and study. This, in turn, caused at-home consumption of food and beverage to increase and restaurant and hotel consumption to decrease.

Jamaican Teas and its distributors benefited from this shift in consumption demand. The gross profit margin of Jamaican Teas moved from 29 per cent in 2019 to 33 per cent in 2020.

This margin growth was driven in part by processes of changing suppliers, changing the contractual terms on which the company buys non-manufactured products from existing suppliers and the favourable impact of producing soups in-house during the year.

Growth in manufacturing exceeded budget

Manufacturing sales growth in the three months to December 2020 was very strong and exceeded what was budgeted. The company’s production of soups and seasonings is continuing to grow and attract new customers locally and overseas.

The management of Jamaica Teas reported: “We sense that the economy could be recovering slowly from a sharp decline in 2020. The rebounding of the investment market augurs well and our local investments have continued to recover their value in the first three months of the new financial year.”

Investment subsidiary expected to post first quarter profit

In the investment arena, the per share net asset value of its QWI investment subsidiary has increased from $1.08 at September 30, 2020, to $1.15 at December 31, 2020. This will likely result in in a first quarter profit before tax for QWI of close to $100 million, compared to a loss of $94 million in the year ago quarter.

The company reports that local and overseas markets continue to exhibit bullish signals and, accordingly, we expect continued growth for the portfolio, barring any unseen developments. Jamaican Teas says it will carefully monitor the available opportunities for real estate and financial investments, so as to strengthen and diversify its revenue streams to the benefit of its shareholders.