Jamaican Teas grows profit despite loss-making retail, real estate segments
Jamaican Teas' retail grocery and real estate busi-nesses were a drag on the company, but growth in its core manufacturing operation and other income were more than enough to wipe out the losses.
Overall, the company, which manufactures under the Tetley and Caribbean Dreams brands, made $92 million in annual operating profit at September 2015, up from $63 million a year ago. Net profit climbed from $52 million to $81 million.
The $11-million hit to the real estate segment was caused by "delays in completing the sales due to delays in obtaining the splinter titles" for units in the St Thomas-based Orchid Estate residential development.
The company said the delays caused "considerable funds to be tied up in work in progress and receivables.
"Although we completed the real estate project, we were not able to deliver the houses because of the delays in the approvals from the St Thomas Parish Council and the issuing of titles," said Jamaican Teas CEO John Mahfood.
The delays left the company holding interest charges on loans it took to fund the project without the revenue from sales, he said. All 29 units in phase one of Orchid Estate have now been sold.
The phase two sales are being handled differently, said Mahfood, who plans to collect deposits from buyers before he builds the units.
"Where, in phase one, we built the house first and then sold, we will build the house based on signed contracts so that we don't [have a repeat]," he said.
Construction will also be financed from the proceeds of sales from phase one, instead of going for more loans.
Some 15 units have already been sold under phase two of Orchid Estate, which will provide a total of 41 units.
Mahfood said the company may opt to "build 10 at a time".
The real estate segment contributed $87 million of revenue in 2015, retail $527 million and manufacturing $737 - totalling $1.34 billion. Last year, sales amounted to $1.1 billion.
"The main reasons for the increase were the $107 million increases in sales from the manufacturing division and the inclusion of $79 million in sales of real estate at the Orchid Estate," the company said.
On the manufacturing side of the operation, export sales also increased by 32 per cent, from $281 million to $370 million, to outperform domestic tea sales, which brought in $363 million.
Jamaican Teas attributed the export gains to increased demand in the Caribbean as well as a new distributor for the Tri-State area of the United States.
In the retail segment, which incorporates supermarket operations in three parishes, losses amounted to $10.7 million, but this was a much better outcome than 2014 when the segment took a $25-million hit.
Mahfood said the continued drain on retail was mainly from the Montego Bay supermarket, Bay City Foods, in which Jamaican Teas has a 49 per cent stake.
The other two operate under the brand Shoppers Delite in Westmoreland and Kingston.
The Kingston store is "very profitable", while the losses at Westmoreland were minor.
"The basic problem is our store in Montego Bay continues to lose quite a bit of money and that is impacting on the overall results for retail," said the Jamaican Teas CEO.
The company also continues to be plagued by inventory theft.
"In 2014, we lost a lot of money through theft, which is a big issue in the supermarket business. It was not eliminated in 2015, but was substantially reduced," he said.