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Seprod takes on joint venture partner in Jamaica Grains

Published:Friday | April 8, 2016 | 4:00 AM
Richard Pandohie, CEO of Seprod Limited.

Tameka Gordon, Business Reporter

Seprod Limited has sold half of its holdings in former subsidiary Jamaica Grain and Cereals, and has entered into a joint venture with an unnamed partner which will share control of the business.

Seprod retains 50 per cent of what was a full subsidiary up to last October. The company made a profit of $254 million off the sale of the lossmaking operation, which is in the business of the manufacture and sale of corn products and cereals.

The deal gave Seprod's bottom line a needed boost. Without it, the group's profit would have been cut by nearly two-thirds, but the transaction curtailed the fall in net profit to around 36 per cent - from $895 million at year end 2014 to $577 million in 2015.

Seprod CEO Richard Pandohie declined to name the new partner, saying further announcements on the investor and plans for building out the grains segment will be forthcoming in the next few months.

Jamaica Grain is now valued as a $430-million investment on Seprod's balance sheet. The business made a loss of $5 million in 2014 and a further $1 million last year.

Improvement for cornmeal plant

"The joint-venture investment signifies an investment to upgrade and expand our cornmeal plant," Pandohie told the Financial Gleaner.

The partners will have equal say in how the business operates.

"Consequent on the disposal the shareholder agreement signed with the other shareholder called for joint decision-making, thus causing the group to lose control of the subsidiary and, hence, accounting for its remaining interest as a joint venture," Seprod reported in its year end financial results.

Seprod announced last year that it would be pouring $1.4 billion into upgrades across the company amid stagnant revenues. Seprod's top-line sales amounted to $13.8 billion last year, down from $14 billion in 2014 and $13.9 billion in 2013.

The company has budgeted $1 billion for the agro-business, snack division, and oil and fats divisions; while roughly $400 million will be spent on the dairy division to expand the overall operation and introduce automation, the company indicated in 2015.

Last year, its capital spend doubled to $718 million as the projects unfolded.

The investments to be made in Jamaica Grain will enable the company to "compete more ably with imported products, to produce value-added cornmeal-based product, and to become a competitive exporter of primary and value-added products as well," Pandohie said.

The company also continues to rack up losses from its St Thomas-based sugar subsidiary Golden Grove, but is now executing a turnaround plan that began with the outsourcing of the agricultural side of the operation to focus entirely on manufacturing and continue with its entry into retail sugar sales. Golden Grove's focus is now on building out export markets for its sugar and developing new retail products.

Seprod owns 71.2 per cent of Golden Grove, while minority partners Fred M. Jones Estate Limited holds 17.8 per cent and Quadrille Holdings 11 per cent.

tameka.gordon@gleanerjm.com