Strong FX gains last year reverses to losses

Durrant Pate/Contributor

Sterling Investments Limited struggled through 2022 with profits going down, due in part to foreign exchange losses being incurred at a time when foreign exchange gains were projected.

Net income for the year went down 73 per cent, moving from J$159.81 million in 2021 to J$42.71 million for 2022. No tax charges were reported for the year compared to J$1.22 million in 2021.

Sterling Investments experienced total unrealised foreign exchange (FX) losses of J$30.3 million in 2022 due to the appreciation in the Jamaican dollar against its American counterpart. This compared to a foreign exchange gain of J$110 million in 2021.

The foreign exchange losses resulted in a decline in total profit from J$159.8 million in 2021 to J$42.7 million in 2022. Sterling Investments is maintaining that its long-term outlook is that a long US dollar position is the safest and most rewarding strategy for shareholders.

FX losses unlikely to persist

The company anticipates that the FX losses are unlikely to persist in the medium term nothing that, “as market prices recover, we expect declines in asset values to be reversed. Investors will continue to benefit from the US dollar income Sterling Investment’s portfolio generates through dividend payments”.

The company says its exposure to the developed countries delivers a true source of diversification to shareholders emphasising that it continues to demonstrates resilience amid broad market declines.  Sterling Investments continues to generate steady levels of US dollar income from its global bond portfolio and shareholders enjoyed this in the form of dividends throughout the year.

At the same time, the management took advantage of the market declines by purchasing undervalued assets and reinvesting liquidity in higher yielding securities. The company expects interest rates to move higher and ultimately result in higher levels of income for shareholders.

Marginal rise in interest income

Total interest income increased two per cent from J$145.3 million for the 2021 fiscal year to J$148.2 million for the year in review. Sterling Investments is prudently rotating into higher yielding securities. The company expects interest rates to move higher and is keeping funds liquid to take advantage of the rising yields.

The company remains focused on managing duration and interest rate risks as well as positioning the portfolio to take advantage of future volatility that may arise. Sterling Investments is an investment holding company that invests primarily in US dollar fixed income investments across the globe.

The company was formed in 2012 when the JMD/USD exchange rate was J$92 / US$1 and prior to the National Debt Exchange.