Management provides explanation for decline in profit

Jamaican manufacturing conglomerate, Seprod Group has seen its 2021 year-end profit decline by 25 per cent to J$2.16 billion, coming from the J$2.87 million reported in 2020.

During the fourth quarter ended December 2021, the company made net profit of J$455.26 million, up from the J$389.29 million reported during the comparable quarter in 2021. Net profit from continuing operations for the year closed at J$2.14 billion, down from J$2.85 billion in 2020, representing a 25 per cent decline year over year.

Net profit from discontinued operations totaled J$21.88 million versus the net profit of J$23.03 million reported in 2020. The management has sought to explain the reasons for the drop in profit.

The Richard Pandohie management team asserted that, “this decline must be put in context as, in 2020, the Group recorded a one-off gain of J$762 million from the sale of a property. With the exception of this one-off gain, the unaudited full year profit for 2021 increased by J$47 million or two per cent versus the corresponding period in 2020”.

The management also cited the October 9, 2021 devastating fire at its subsidiary, Facey, where its merchandise’s distribution centre was destroyed, as also having an adverse impact on the group’s bottom line. The fire wiped-out over 86 per cent of the finished goods inventory, which also included the Christmas stocks.

Facey fire cited as among the reasons for the decline in profit

According to the management, “this severely impacted the financial performance, as the well documented global supply chain challenges have limited the speed of replacement of the lost inventory. Our manufacturing entities have ramped up production, our principals in the distribution pillar did their best to supply, local stakeholders partnered with us to find and make functional alternative location for storage and our employees have simply been outstanding”.’

The Seprod Group management explained that while the group lost billions of dollars of inventory and infrastructure, which were all adequately insured, it did not bow but have started to recovery. In concluding the management reported, “we will emerge from this a more resilient, efficient, and committed organisation with a strong growth trajectory”.

For 2021 Seprod posted revenue totalling J$42.91 billion compared to J$37.74 billion recorded in 2020, representing a 14 per cent increase year over year. Revenue for the December quarter amounted to J$11.76 billion relative to the $9.08 billion reported in 2020.

Other financial highlights

Direct expenses increased by 17 per cent from J$27.25 billion to J$31.90 billion. The company reported nil for ‘Gain on sale of distribution facility’ for 2021 compared to J$762.27 million recorded in 2020.

Other operating expenses rose three per cent to close the period at J$8.57 billion, up from the 2020 posting of J$8.30 billion. Finance costs for the year under review amounted to $1.18 billion, down from J$1.27 billion IN 2020, a seven per cent reduction year over year.

Total comprehensive income closed at J$2.51 billion, down from the J$2.97 billion reported in 2020. As at December 31, 2021, Seprod’s total assets increased by four per cent to J$39.65 billion, up from J$38.08 billion a year ago.

Non-current assets closed at J$21.53 billion (2020: $21.04 billion), while current assets amounted to J$18.12 billion (2020: J$17.04 billion). The overall increase was mainly attributable to a 26 per cent increase in ‘Trade and Other Receivables’ which amounted to $6.96 billion relative to the $5.52 billion reported 12 months prior.

Inventories also grew 19 per cent or J$1.41 billion to close the year at J$8.97 billion (2020: J$7.56 billion).