Durrant Pate/Contributor

The Jamaica Teas Group experienced mixed fortunes during the just ended June third quarter with the manufacturing and real estate division improving but the investment division, QWI Investments, chalking up investment losses.

The mixed performance resulted in the group financial performance going south, as pretax profit moved from J$278 million a year ago to a loss of J$70 million for the quarter under review, resulting from the losses on QWI’s investment portfolio.

For the year to date, profit before tax declined from J$661 million to J$231 million for the year-to-date. Taxation moved from a charge of J$68 million last year to a credit this quarter of J$23 million.

Net profit for the quarter attributable to the members of Jamaican Teas was J$24 million compared with J$115 million in the previous year quarter. For the year to date, attributable net profit moved from J$313 million to J$186 million.

Manufacturing and retail divisions improving

Export manufacturing sales rose a strong 40 per cent in the quarter as the manufacturing division overcame the shortage of raw materials required to fulfil orders of finished products experienced earlier in the year. Local sales improved by 10 per cent in the quarter over 2021.

Total manufacturing sales for the nine months to June 2022 amounted to J$1.36 billion, an increase of 12 per cent over 2021 delivered sales of J$1.21 billion. The retail division put in a solid performance with a 28 per cent sales increase in the quarter reflecting in part the absence of the COVID restrictions seen in 2021 and the return to Jamaica Teas’ regular operating hours.

The retail division saw revenues growing to J$161 million versus $126 million a year ago. Jamaica Teas’ retail store has returned to its former hours of operation and has continued to see improved sales, customer count and profits following the quarter end.

The real estate division booked several studio sales during the year-ago quarter. The current real estate project is now completely sold. The division’s latest project at Belvedere in Kingston is proceeding apace with physical completion anticipated later in calendar 2022.

Sales activity for Belvedere has already commenced with the displaying of model units that have been well received by potential purchasers.

QWI chalked up investment losses

QWI Investment, the investment subsidiary of the group, didn’t fare as well. While the share portfolio outperformed its overseas benchmarks, the portfolio was still adversely affected by the strong retracement of share prices in the USA as well as in many main market stocks in Jamaica. The third quarter and year-to-date attributable profits were lower than the prior year periods mainly as a result of the reversals at QWI.

During the quarter, there was a poor performance of stocks on the Jamaican and USA Stock Exchanges with significant share price retracements overseas but a stronger performance mainly in Jamaica’s Junior Market. This resulted in unrealised investment losses for QWI of J$132 million in the quarter versus gains of J$162 million in the year-ago quarter.

Group revenues and expenses

Total revenues for the quarter increased by 22 per cent from J$530.7 million to J$649 million despite the absence of any real estate sales this quarter versus 2021 which included real estate sales from Manor Park. For the year-to-date sales increased 4 per cent.

The decrease in investment income this quarter mainly reflects the impact of unrealised fair value losses in QWI’s investment portfolio. While revenues have been climbing, costs have been rising for both the quarter and year-to-date.

The rising costs have been outstripping the revenue growth, resulting in the loss of two percentage points of gross profit margin. This adverse trend resulted from sharp increases in ocean freight costs as well as increases in raw materials costs not yet fully reflected in prices to customers.

Price increases were effected in all of QWI’s markets in January 2022 and again on July 1, 2022. Administrative costs escalated and mainly reflected increased insurance and investment management expenses at QWI in the period as well as salary and wage increases at the manufacturing division.

The increase in interest expense resulted from higher borrowings at QWI and the manufacturing division, the latter due to the need to fund higher levels of inventory.