Impressive first-quarter performance

Durrant Pate/Contributor

Spur Tree Spices Jamaica is well underway into transitioning into a fully equipped food company with the consolidation of its newly acquired subsidiary CANCO in addition to further investments in leased space and staff expenditure to support its ongoing growth strategy.

The company, which went public last year through a successful Initial Public Offer (IPO) of shares recorded an impressive first quarter, which sets the tone for a successful year ahead, as the Metry Seaga chaired company continues with its strategic plan of transitioning from a sauces and seasonings provider to a fully equipped food company.

The principal activities of the Group are the manufacturing and distributing of seasonings, spices, canned ackee and callaloo primarily for the export market. Revenues continue to soar with the latest out-turn for the March quarter showing a 62 per cent jump over the previous year’s quarter, which had also grown by an impressive 40 per cent moving from J$237.1 million in March 2022 to J$383.67 million for the quarter under review.

Aggressive revenue growth strategy

The management reports this as a clear demonstration of the success of its aggressive and agile revenue growth strategy. Another key element of its core strategy continues to be increasing its footprint by creating new customer segments and to capitalise on new and emerging opportunities in both the local and international markets which has also contributed to the additional revenue for the period. In addition to revenue from its acquisition investments, Spur Tree Spices continues to build out its footprint into new territories and establish partnerships in key markets.

Cost of Sales for the period increased from 62.45 per cent of sales for last year to 67.6 per cent of sales for the current period. The increase in Cost of Sales was driven by the consolidation of newly acquired subsidiaries and cost increases primarily in raw material inputs in the holding company. 

While there has been a gradual reduction in freight rates on a global scale, the company has had to continue to prioritize the sourcing of at least 90 per cent of its raw materials from local suppliers. Due to the high inflationary climate, there has been an increase in costs of up to 30 per cent of some local raw materials. 

As such, Spur Tree Spices continues to strategize with its local partners to find ways to gain efficiencies and reduce costs over the medium-long term while leveraging economies of scale gained from business growth. The company plans to continue to build capacity to store and process raw materials to be able to take advantage of any market excesses. 

Slight decline in net profit

There was a slight decline in net profit which went from J$50.8 million in March 2022 to J$47.84 in March 2023, representing a six per cent fall, which was mainly due to Cost of Sales expenses. Gross profit increased from J$89.9 million in March last year to close the March 2023 quarter at J$124.9 million, which represents a 39 per cent increase year on year. 

While Spur Tree Spices overall gross profit improved, the margins were lower than those achieved for the similar period 2022, due to the cost challenges highlighted above. However, the management anticipates that its gross margins will gradually recover, as cost gains are achieved through the initiatives discussed above and the expansion of  product lines.