Sat | Aug 19, 2017

Red Stripe reports 35% jump in earnings ahead of delisting

Published:Wednesday | March 2, 2016 | 3:00 AM

Red Stripe's earnings jumped 35 per cent above year-earlier levels during the three months to December 2015.

The report comes just ahead of the brewery's delisting from the Jamaica Stock Exchange.

Net profit increased from $675 million in the corresponding quarter in 2014 to $908 million in the quarter under review.

Domestic volume growth and a price increase taken last September boosted the brewer's revenue by eight per cent, while modernisation of the Spanish Town Road plant led to a two percentage point improvement in gross margin on locally sold beverages to 45 per cent.

Local sales, net of special consumption tax, increased from $3.4 billion to $3.7 billion, while cost of goods sold rose by $155 million to $2 billion.

IMPROVED GROSS MARGIN

The company also reported improved gross margin for its export division, for which beer is made in North America and the United Kingdom for sale to those markets. The efficiency measure increased from 48 per cent in the comparative three-month period last year to 52 per cent in the quarter under review.

The beer maker also ramped up its marketing spend in Jamaica by 18 per cent, as it launched its What's Good Red Stripe brand campaign in October.

"Our new innovations such as Red Stripe Lemon Paradise, D&G Malta in a can, and the one-litre Dragon Stout format, also contributed to the increase in marketing spend," wrote company Chairman Richard Byles and Managing Director Ricardo Nuncio in a report to shareholders accompanying the latest and possibly last published financial statement before the company delists.

The expense item increased from $379 million during the three months to December 31, 2014, to $446 million in the review quarter.

PROJECT GROW INITIATIVE

In an update on the company's Project Grow initiative, Red Stripe said that it "continues to make headway with 25 of the 280 acres currently under cultivation at the Wallen Farm in St Catherine".

"This along with the 36 acres at Bernard Lodge, also in St Catherine, has allowed us to include five per cent cassava starch in our beer production, with the intent of increasing to 10 per cent in the first quarter of 2016," said the directors' report.

The brewer's year end was recently changed from June 30 to December 31 to align financial reporting with its new parent, Heineken. So the aim is to double the amount of Cassava used in the local beer by the end of March 2017.

"A dedicated farmhouse for the Wallen farm was also opened, allowing for better productivity and comfort for farm workers," the company said.

camilo.thame@gleanerjm.com