Profitability and revenues declined during second quarter

Durrant Pate/Contributor

In an Our Today news follow-up, Jamaican Teas Group is projecting a better second quarter of its 2022 financial year, having gone through a relatively dismal first half.

The less than impressive performance in the first half of 2022 was as a result of severe challenges faced during the period, but Board Chairman John Jackson is optimistic of a turnaround in the manufacturing-led group during the second half of the year.

He is pointing to “signs that some of the issues may be abating”.

Said Jackson: “We suffered from high freight charges but that seems to be easing. We also suffered from stock outs but much of the raw material shortage that caused these shortages has now been alleviated.“

These signs include the fact that export shipments last month were 39 per cent higher than in April 2021 and export shipments for the seven months to April now exceed the comparable year-ago period. At the supermarket subsidiary, April 2022 sales were 32 per cent higher than April 2021.

Dismal half-year performance

Turning to the dismal performance during the first half of the year, net profit  dropped from J$198 million in 2021 to J$171 million for the period under review.

Net profit  attributable to members of the group for the March quarter in particular amounted to J$87 million, down from J$111 million posted for the comparable period in 2021.

Profit before tax moved from J$153 million a year ago to J$109 million the quarter under review, mainly resulting from the reduced real estate sales and adverse cost of sales trends. Taxation moved from almost J$42 million last year to a charge this quarter of J$22 million.

For the half year, profit before tax moved from J$382 million in 2021 to J$335 million. Total revenues for the quarter decreased by 5.5 per cent or J$33 million from J$608 million to J$575 million, due to the absence of any real estate sales this quarter versus 2021, which included real estate sales from Manor Park.

Unrealised exchange losses

There was a decline in Other Income this quarter, which mainly reflects the impact of unrealised exchange losses on the foreign currency shares and other foreign currency denominated assets owned by group member companies compared with a year ago. This is a direct result of the recent revaluation of the Jamaican dollar in the quarter.

For the half year, the group reported a foreign exchange gain of almost J$32 million. Cost of sales for the quarter only fell by 4.5 per cent, as this adverse trend resulted from the sharp increases in ocean freight costs as well as increases in raw materials costs and the effects of the longer-term depreciation of the Jamaican dollar.

Price increases were effected in all markets in January 2022 and are expected to assist in recovering the erosion in gross margins seen in 2021. Further price actions are being reviewed by management on an ongoing basis.

Administrative costs rose mainly from increased insurance and investment management expenses at the group’s QWI Investment subsidiary during the period as well as salary and wage increases at the Manufacturing Division. The increase in interest expense resulted from higher borrowings at the Manufacturing Division.

Jackson is optimistic that “QWI will enjoy a profitable year with more gains in the second half, there are various developments that could negatively affect the outturn. We are, however, encouraged by the recovery in tourism in Jamaica, increasing employment and the positive profit results at several listed companies that augur well for the stock market”.

However, the company has taken note of the rising interest rates in Jamaica and overseas. There have been increases in inventory since September 2021, which is due to the arrival of raw materials, previously in short supply, late in the quarter.

The increase in Housing under Construction since September 2021 is a result of the build out of Belvedere while the increase in receivables resulted, in part, from delays in the shipment of certain finished goods sourced in Asia to some of Jamaican Teas’ larger overseas customers.