Rebound in performance of QWI investment subsidiary

Jamaican Teas Limited is reporting flat sales during the just ended third quarter, having successfully navigated the challenges of 2020.

The third quarter results reflect a good performance but with some moderation of the strong trends seen in the previous quarters. Since the end of the quarter, the group continues to record strong sales on both the export and local market and increased gains in investment company, QWI.

However, the directors report that, ”our manufacturing operations had mixed results with sales essentially flat at $382 million arising from an increase of 36 per cent in local sales offset by a 19 per cent reduction in export sales over the prior year. This was a reversal from the trends seen in the prior quarters. The improved local performance was primarily the result of increased production which resulted in all items being in stock and available for sale”.

The reduction in export shipments arose mainly in the company’s USA accounts. In the USA what is occurring is a reversal of the stay at home, work at home, eat at home pattern seen in 2020, as more areas of life in the USA return to pre COVID patterns and people once again eat in restaurants and fast food outlets.

“This is significant for us because our USA distributors are mainly oriented towards supermarket outlets and do not service hotels and restaurants on any significant scale. We completed the last sale agreement at Ports View apartment complex during the quarter,” the directors advised shareholders in their third quarter report.

Rebound in QWI

There has been a rebound in the performance in investment company, QWI. During the quarter the improvement in the prices of stocks on the Jamaican and New York Stock Exchanges continued.

This has resulted in investment gains for QWI Investments, resulting in a net profit of $163 million this quarter and $334 million for the nine months period.

“Our expectation is that we will see a continuation of this trend in the final quarter of the financial year,” reported Chairman John Jackson and CEO John Mahfood.

The increase in interest expense during the quarter and year to date resulted from higher borrowings at QWI. QWI’s Net Asset Value (NAV) per share had risen approximately two per cent up to the time of writing this report and further gains are anticipated between now and the end of the calendar year.

Revenues up in third quarter

Jamaican Teas’ total revenues for the third quarter increased by $24.8 million to $530.7 million. Most of this increase arose, as there were no real estate sales in the year ago quarter.

Sales at Jamaican Teas’ supermarket arm increased by seven per cent in the third quarter. This was a direct result of less limited operating restrictions on store hours as a result of changes to the curfew hours in Kingston as compared with a year ago.

The increase in Investment and Other Income this quarter mainly reflects increases in the un-realised investment gains of QWI compared with a year ago.

For the nine months, the 24 per cent increase in sales reflects a 31 per cent increase in export manufacturing sales, a nine per cent increase in domestic manufacturing sales, a three per cent decrease in supermarket sales compared with last year and the completion of sales of the Port View apartments.

There were no sales of real estate units in the comparative period last fiscal year. The reversal in the Investment Income from a $481-million loss to income of almost $441 million primarily resulted from a recovery from the heavy unrealised losses QWI experienced in its holdings of shares in the second quarter of 2019/20 caused by the onset of COVID 19 and its impact on stock prices.

Cost pressure in manufacturing division

The manufacturing division experienced some cost pressures from increased freight costs, import duties and raw material price increases that were not passed on to customers. The decrease in sales and marketing expenses for the quarter and year to date primarily reflects the curtailment of some of our overseas marketing activities due to COVID related travel restrictions.  

Net profit attributable to Jamaican Teas for the quarter was $115 million, an improvement from the $107 million gain in the previous year quarter. Total attributable comprehensive earnings per share based on the existing number of shares, is five cents for the quarter.

For the year to date, net profit attributable to Jamaican Teas was $313 million, a strong gain from the $84.9 million profit in the previous year.