J$100 million in lost sales due to the shortages

Durrant Pate/Contributor

Medical Disposables and Supplies (MDS) has taken a hit from out-of-stock issues, which the Kingston-based, publicly listed company says continue to affect its profitability.

These issues arise from the fact that MDS’ suppliers are faced with global supply chain challenges within their operations, where the availability of key specialty products such as vaccines and oncology medicines have become infrequent and inconsistent. Internal estimates have tracked over J$100 million in lost sales due to the shortages during the third quarter ended December 31, 2022.

Profit after tax attributable to shareholders for the December quarter was J$57.96 million, down by J$6.94 million or a 10.7 per cent decline from 2021. Sales for the third quarter grew by J$65.91 million or 7.5 per cent when compared to December 2021.

The group generated revenue of J$940.54 million for the December quarter compared to J$874.63 million at the same point in the prior year. The growth was driven by increased demand for pharmaceutical and consumer items.

Gross profit of J$272.86 million for the current quarter improved by 16.6 per cent or J$38.82 million when compared to the third quarter of the previous year.

Increased sales

Total sales increased by 10.8 per cent or J$269.52 million for the nine-month period ended December 31, 2022, moving to J$2.76 billion from J$2.49 billion generated for the same period in 2021. This growth was driven by increased sales across all Divisions including the subsidiary, Cornwall Enterprises Limited.

Total operational expenses rose 20.5 per cent or J$99.59 million, largely due to higher administrative expenses, higher salaries, staff benefits and related expenses, as MDS positions itself to manage the projected expansion possibilities. MDS’ Chief Executive Officer Kurt Booth said he was cognizant that, to achieve its goals and strategic objectives, the business must retain and attract the best talent in the industry.

“This must be a deliberate priority in its medium-term planning,” said Boothe.

“Selling and promotion costs have grown by J$53.56 million in line with the significant year over year growth in sales. Non-operational costs increased by 28.2 per cent or J$18.92 million for the year to date when compared to the nine-month period in the prior year. This was due mainly to an overall upward adjustment in financing costs, particularly working capital.”

Boothe emphasised that the increased usage of the working capital lines of credit was deemed necessary to hold greater levels of inventory in an effort to mitigate against any additional supply chain risks that could lead to further out-of-stock instances. He boasted that MDS achieved a reduction in exchange rate losses through the prudent management of its foreign exchange reserves.

Both assets and liabilities went up

Total assets grew by $330.73 million or 11.7 per cent, moving from J$2.82 billion as at December 2021 to J$3.15 billion end of December 2022. Inventory increased by 31.2 per cent or J$364.68 billion when compared to the previous year. During the last year, MDS implemented a new strategic approach to purchasing and logistics, which has resulted in the need to increase the inventory levels on hand.

This response will also minimise the risks associated with uncertainties caused by disruptions in the global shipping and logistics sector. Trade and other receivables decreased by J$104.92 million as at December 31, 2022 when compared to the same period in 2021.

Total liabilities increased by J$233.40 million or 13.4 per cent from J$1.75 billion at the end of the third quarter of the prior year to J$1.98 billion for the same period in 2022. Total borrowing grew by J$185.2 million, which was used to finance the increase in inventory levels. Trade and other payables increased slightly by J$20.48 million when compared to the corresponding year.