Massy's turnaround in Jamaica stalls
Massy Holdings’ Jamaican operations saw its earnings rise for the second year in a row, but the modest gains was just shy of the amount the conglomerate needed to offset currency depreciation in 2015.
Still, the performance suggests that a financial turnaround resulting from a major overhaul of operations has been sustained.
The Trinidad-based group, which operates a distribution company, an IT firm and an LPG business in Jamaica, posted TT$50 million ($910 million) in pre-tax profit from TT$622 million for the year ended September 30, 2015.
Earnings were four per cent higher than year earlier-levels when expressed in Jamaican dollars, but a near six per cent depreciation of the currency meant that profit before tax was slightly less than in 2014, when expressed in TT dollars.
Revenue from Jamaica was down in any currency. Sales in 2015 were 13 per cent less than the year before, when expressed in TT dollars, while it was down eight per cent in Jamaican dollars. A dramatic decline in energy prices likely contributed to the reduction in revenue.
On the other hand, Massy’s energy operations in Jamaica has seen considerable turnaround after exiting the retail gasolene business in 2012 when it sold its 40 per cent stake in loss-making Cool Petroleum and began to focus entirely on LPG, which it distributes under the GasPro brand.
Since then, it has pumped capital into building new expanded storage tanks at Massy Gas Products which allowed it to secure better gas prices. Equipment conversions at several manufacturing companies and at a major hotel in 2014 resulted in increased consumption of LPG, while the company secured a contract to supply Red Stripe’s three megawatt combined heat and power plant.
The conglomerate’s distribution business also underwent a major overhaul. It changed its management team in 2012; cut dozens of staff and realigned its portfolio, increasing its offering of commodity-type products in 2013; and acquired new principals in 2014. Massy also rebranded all its business lines across its markets in 2014.
Prior to these changes, Massy watched the profitability of its Jamaican operations fall by 28 per cent between 2011 and 2013. Put another way, its pre-tax margin fell from 8.8 per cent to 5.8 per cent over the three-year period. Last year, that margin stood at eight per cent.
Return on assets also rose from 10 per cent in 2013 to 13 per cent last year.
However, Jamaica continued to decline in significance for the Massy group. The country’s revenue represented just 5.2 per cent of total sales, compared with 9.3 per cent in 2008. Massy has since expanded into other countries, such as Colombia, which surpassed Jamaica and Guyana in terms of revenue significance in just one year.