Finances impacted by dollar depreciation and higher operational costs
Food distribution company, Derrimon Trading Group has returned stymied revenue performance for the nine month period ended September 2020.
Derrimon returned revenues of $9.62 billion, which is $0.88 million or one per cent over the $9.53 billion reported for the same period in 2019. The company says the revenue growth was “stymied by the impact of the COVID-19 pandemic and was relatively flat when compared to the prior year”.
For the period under review Derrimon reported gross profit of $1.84 billion, which represents an increase of $181.60 million (10.95 per cent) above the $1.66 billion reported for the comparative period in 2019. The improvements realised was primarily attributed to a combination of factors which includes improvement in the procurement and logistics process as well as a focus on higher yielding products.
Consolidated operating expenses for the review period was $1.44 billion, representing an increase of $176.20 million (13.92 per cent) over the $1.27 billion increase reported for the same period in 2019. This was influenced by increased rental expenses in relation to Derrimon’s new distribution centre, salaries and wages as well as utilities.
Derrimon’s Chairman and CEO Derrick Cotterell says these areas were impacted by the depreciation of the Jamaican dollar and other operational costs driven by the new sanitation regime given the requirements of the COVID-19 pandemic.
PROFITS AND REALIGNMENT OF DEBT PORTFOLIO
Pre-tax Profit recorded for the period was $191.67 million, representing a $64.99 million (51.31 per cent) increase over the $126.68 million reported for the corresponding period in 2019. For the three months ended September 30, 2020, pre-tax profit was $72.61 million or $35.76 million (97.07 per cent) greater when compared to the $36.86 million reported for the corresponding period.
Net profit for the nine months period was $167.72 million, which was $64.99 million (51.31 per cent) higher when compared to the same period last year. For the third quarter ending September 30, 2020, core operations generated net profit of $63.53 million which is $31.29 million (97.07 per cent) greater than the $32.24 million reported for the similar period for 2019.
Derrimon’s finances continues to benefit from the realignment of its debt portfolio from short term to long term amortised facilities, the switching from US Dollar loans to Jamaican dollar facilities and the re-negotiation of interest rate. These continue to positively impact the finance cost of the group.
This has resulted in a $13.34 million or 8.37 per cent reduction for the financial year to date when compared to the similar period in 2019. The consolidated profit before tax earned for the nine months was $315.50 million, an increase of $61.22 million (24.08 per cent) over the $254.28 million reported for the similar period in 2019.
SLIGHT INCREASES IN THE DISTRIBUTION AND RETAIL ARMS
Despite the negative impact of the COVID-19 pandemic, the distribution and retail arms of the business recorded revenue of $8.74 billion, which was $53.63 million (0.62 per cent) more than the $8.69 billion reported for the corresponding period last year. For the third quarter ended September 2020, revenue generated from core activity was $3.029 billion, representing a growth of $72.641 million (2.46 per cent) over the $2.96 billion reported for the similar reporting period in 2019.
This growth was influenced and stabilised by the retail arm of the business. The impact from the closure of schools, entertainment sector and commerce in general negatively impacted the sales of the beverage portfolio in particular.
However, Derrimon continue to see growth in the bulk goods, cold storage and other dry categories and the company is encouraged by this quarter’s performance. Gross profit from these divisions came out at $1.59 billion, which represents a $179.05 million (12.74 per cent) increase above the $1.41 billion reported for the similar period in 2019.
Gross profit for the third quarter was $558.61 million, which was $73.68 million (15.19 per cent) more than the $484.92 million reported in the similar period in 2019. The increase in gross profit came as result of a combination of strategies employed within the distribution and retail segments of the business from procurement to sales.
OPERATING EXPENSES UP 14.4%
Operation expense is on the rise totaling $1.28 billion, which is $163.40 million above the $1.13 billion reported for the comparative period last year. For the third quarter ending September 30, 2020, operating expenses was $457.61 million, which was $64.58 million (16.43 per cent) above the expenses incurred for the similar period in 2019.
The major factors for this increase were utilities, rental of properties, sanitisation and cleaning expenses, distribution costs inclusive of trucking, marketing, advertising, and staff cost. Finance charges for the period were $144.56 million, a reduction of $12.57 million (eight per cent) from the $157.13 million reported at September 30, 2019.
For the September quarter, the finance cost was $48.19 million, which was $10.82 million (18.31 per cent) below that reported for the similar quarter in 2019.
According to Cotterell, “on the whole, the results for the nine months of 2020 are encouraging for our business despite the global pandemic which has resulted in an economic slowdown which has negatively impacted some aspects of our business. We will continue to execute our strategy and adopt all the safety measures being initiated by our internal team as well as our government whilst monitoring and managing each element of risk despite the many challenges, we remain confident that we have the right talent and leadership to deliver on our plans for the ensuing periods. We thank our employees for their commitment and dedication”.