However, heavy losses incurred by investment division

Durrant Pate/Contributor

The Jamaican Teas Group enjoyed rising sales during the December 2022 first quarter with this trend expected to carry over into the balance of the year.

However, the group profits were reduced by a decline in the results for its investment division as well as the continuing effects of logistical issues surrounding some raw material inputs in the manufacturing division. There are indications that, during the current financial year, the investment division will benefit positively from planned strategies pursued as well as improvements in the investing climate that are unfolding and likely to improve further as the year continues.

Net profit for the quarter amounted to J$27 million, a sharp decline from the J$113 million profit made in the same quarter, 2021. This decline in profit arose mainly from the stock market losses from the Investment Division in the quarter versus that of the previous year, which was a very strong year.

Total attributable comprehensive income per share is one cent for this quarter compared to five cents for the comparable period in 2021.

Revenues and expenses

Total revenues for the quarter increased by 12 per cent overall, moving from J$596 million a year ago to J$666 million for the quarter under review. The losses shown in the Group’s investment income mainly reflect the realised and unrealised investment losses of its investment subsidiary, QWI, which was partially offset by higher dividend income compared with the year-ago period.

A J$35-million exchange gain in December 2021 reversed to a J$5-million loss in the quarter under review, due to the revaluation of the Jamaican dollar on the last trading day of December 2022, which was reversed in January 2023.

The increases in cost of sales for the quarter exceeded the growth in revenues, which was partly as a result of sharp increases in ocean marine freight rates in 2022 compared with prior periods. This affected raw materials purchased earlier in 2022, which are still being consumed.

Ocean freight rates declined sharply during the course of 2022 but the company will not see the benefit of this in 2023, as higher cost raw materials are used in production and repurchased with the benefit of lower shipping costs. Cost of sales were also adversely affected by the increased cost of operating from two separate factory premises versus one up to March 2022.

Other expenses reflected stepped up marketing activities locally, which was offset by lower administrative costs at QWI, due to lower investment management expenses in the quarter. There was an increase in interest expense during the quarter resulted from higher interest rates as well as increased short-term borrowings by Jamaican Teas.

Manufacturing Division

The highlight for the quarter was the gain in export sales which rose 11 per cent over the prior year. Growth in this area decelerated over the pace seen in the last fiscal year, mainly due to shortages of packaging materials. This affected several of the contract manufacturers to whom we have sub-contracted production of some of our pantry products.

In addition, tea and spice production was adversely impacted by a combination of employee resignations and machinery breakdowns which resulted in a decline in our rate of order fulfillment to some accounts We have contracted with suppliers for new production machines that are expected to be installed by the end of our second quarter and have filled all staff vacancies.

Real Estate Division

No real estate sales were booked in the quarter this year or the year ago quarter as construction work on our new studios at Belvedere Road, in Kingston is still underway. Construction is expected to finish in March 2023.

Retail Division

For this quarter, retail revenues amounted to $179 million, an increase of 31 per cent. This reflects a continuation of the accelerated revenue growth we have seen in our store in recent months. Our retailing profits almost doubled in the quarter.

Investment Division

During this quarter, there was a continuation of the decline in the prices of stocks on the Jamaica Stock Exchange Main Market. In addition, the junior market also declined during the quarter, reversing the strong growth seen earlier in the year.

USA Stock Exchanges improved in the quarter. This resulted in unrealised gains in our overseas investments but these were more than offset by unrealised investment losses on the local portfolio. This resulted in QWI Investments reporting a net loss of J$65 million for the quarter, a significant reversal from their year ago profit of J$83 million.

The expectation is that this adverse trend will be reversed later in the year, as inflation rates decline and interest rates peak and most importantly, a number of companies we are invested in are expected to deliver above average growth in profits that will drive stock prices higher.