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Export demand bolsters Jamaican Teas, Mahfood upbeat

Published:Friday | March 18, 2016 | 12:00 AM
Rudolph Brown/Freelance Photographer John Mahfood CEO of Jamaican Teas reports to shareholders at the company's AGM held at Jamaica Pegasus hotel in New Kingston on Wednesday.

Export demand bolsters Jamaican Teas, Mahfood upbeat

Neville Graham

Business Reporter

At the end of financial year 2015, Jamaican Teas recorded a 36 per cent increase in after-tax profits, but this was not enough to wipe out the dip in performance the previous year.

Shareholders heard on Wednesday that the near $72 million in annual net profit at September 2015 was a step in the right direction, relative to the $51 million made in 2014, but still well below the $93 million netted by the beverage company in 2013.

The increased profit was on the back of $1.36 billion in gross revenue, which was 14 per cent more than the out-turn for 2014.

Jamaican Teas CEO John Mahfood sounded an upbeat note as he pointed to better-than-expected export sales at Wednesday's annual general meeting. The performance was enough to push Jamaican Teas back up to 2013 levels when exports accounted for 51 per cent of total sales.

"Domestic and export sales are roughly the same, 50 per cent. What has grown are exports to the USA and, I believe, based on what we've seen, that they will continue to grow at a faster rate than our Caribbean sales or domestic sales," Mahfood reported to shareholders.

He said that with the encouraging signs, and based on special requests, Jamaican Teas had developed a number of products geared to the export market.

"We have a number of new products coming on the scene. These are primarily for the export market, especially the US market, where our customers have asked us to develop products for their customers," Mahfood said, highlighting production of soursop and sorrel teas, along with pumpkin and chicken noodle soups.

Asked for specific comment on the company's performance, Chairman John Jackson said the results, though not spectacular, were better than the numbers show on the surface.

"The results, in reality, are better than they appear because of a number of write-offs that took place in the order of $21 million. If you make adjustments for that, the performance is superior to what was reported," Jackson said, while noting there were encouraging signals coming out of the first and second quarter numbers.

The chairman cautioned, however, that company performance must be such that it offers good returns and solid capital appreciation.

"Ultimately, as an investor, I want to see the company perform in such a way that investors feel satisfied that their investment is worth it and that other people can be attracted to invest in the company," Jackson said.

Jamaican Teas' core business is tea production, but the company is also invested in two grocery businesses, and operates a real estate arm, which develops residences.

The company's second real estate project - Orchids Estate in Yallahs, St Thomas - has encountered some hold-ups.

The company says it is yet to complete and hand over to buyers some 29 units, although, as Mahfood reported, construction of the residences were completed in May 2015. He said the delay in handing over the units to homebuyers, now nine months long, is due to slow approvals from the St Thomas Parish Council and the Titles Office.

"Those delays have impacted us in terms of extra interest costs and extra security every month that goes by," said Mahfood. "That nine-month period cost us $5 million, and interest was in the order of $12 million," he said.

Phase two of the Orchids Estate development to build another 42 two-bedroom units is under way. Mahfood anticipates fewer problems with this phase since the necessary approvals have already been secured.

As for the overall performance of the supermarkets, Mahfood reported that the Kingston location has been reporting good customer traffic with an average of 65,000 transactions per month, and similar traffic for Savanna-la-Mar. However, the company is weighing its options and is near a decision regarding the Montego Bay location, which continues to underperform, he said.