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Red Stripe profit triples on sale of overseas investments

Published:Wednesday | September 3, 2014 | 12:00 AM
A section of the Red Stripe Jamaica Brewery, at Spanish Town Road, Kingston. -Gladstone Taylor/Photographer

Richard Browne, Business Reporter

Desnoes and Geddes Limited, which trades as Red Stripe Jamaica, reported profit of $3 billion at yearend June 2014, a near one-third of which resulted from the sale of two overseas investments.

The beer maker made a gain of almost $1 billion on the disposals.

Apart from beer production, Red Stripe also distributes spirits on behalf of parent Diageo Plc, including Johnnie Walker whiskey and Smirnoff vodka.

Total profit for the year was $3.15 billion or $1.12 per share, compared to $1.2 billion or 43 cents per share in 2013. That represents an increase of 160 per cent. Sales shot up to $14 billion from $12.7 billion. Red Stripe paid over $2.59 billion in special consumption taxes on its sales this year, compared to $2.36 billion in FY 2013.

The spike in sales was "primarily attributable to the domestic business which increased by 15 per cent", driven mainly by growth in the "brewed and spirit portfolios, including our new innovation on one litre Red Stripe and Guinness brands", according to the earnings report.

For the fourth quarter, profit stood at $1.01 billion, up from $149 million for the corresponding quarter in 2013 - an increase of 578 per cent.

The increased profit reflected "strong domestic performance as well as gains from the sale of shares in Brasserie Nationale d'Haiti (BRANA) and Windward and Leeward Brewery Limited (WLBL), said Red Stripe chairman Richard Byles and managing director Cedric Blair in a note to shareholders.

The shares in the two overseas companies were sold for $974 million.

Both Caribbean breweries are controlled by Heineken, part of international spirits group Diageo. Red Stripe had a five per cent interest in the Haitian company worth $488 million and a 10 per cent interest in the Windward brewery worth $473 million.

During FY 2014, Red Stripe reinvested $1.7 billion in the company, to more than double its capex spend in 2013, and the company also paid out $1.4 billion as dividend to shareholders, a bump of more than half-billion dollars. Still, its cash pot was marginally improved to $1.79 billion, due to the gains from the investment disposals.

BRANA is Haiti's largest brewery and produces the local Prestige beer as well as Heineken, Guinness and a range of soft drinks, including Pepsi.

The sale of its shares breaks a long relationship that Red Stripe has had with the Haitian company and its founder, Michael Madsen, since even before its inception in 1973.

"On a hunting trip, Michael Madsen was convinced by his friend, a member of the Desnoes family from the Jamaican brewery Desnoes & Geddes, that beer is a universal product, and also Haitians should have their own," according to the BRANA web site.

WLBL is based in St Lucia and produces a pilsner-type beer called Piton. The company also produces Heineken and Guinness. Cedric Blair was a member of the WLBL board, representing Red Stripe's interest until his resignation in December last year.

Red Stripe Jamaica

Revenue per Geographic Market

FY 2014FY 2013Jamaica$9.702m$8.440mUnited Kingdom$461m $425mCanada $369m $404mCaribbean $337m $228mUnited States $300m $566mEurope $166m $109mOther $162m $137m