Caribbean Producers will make a profit, says CEO
Caribbean Producers Jamaica Limited (CPJ), a supplier of liquors and food to the hospitality sector, will still post an accounting profit this year despite impairment of its earnings, according to the company's Chief Executive Officer, Dr David Lowe.
The stock, listed on the junior stock exchange, lost nearly one-third of its value since the impairment notice issued on Monday. It comes ahead of the company's annual financial results.
"We are not going to make a loss or break even. It is not the end of the world," said Dr Lowe in an interview with the Financial Gleaner. "We are confident that the business model remains strong."
The stock closed at $3.09 on Wednesday after losing 28 per cent during the week. The price was unchanged on Thursday.
Auditors are determining the quantum of the possible impairment and, as such, the figure remains undisclosed to date.
"The market reacted based on what it interpreted. But if you have a long-term view on the market and the company, then you will see our strength," said Dr Lowe.
CPJ this week issued a profit warning advising that the presence of unregulated players continue to create inequitable competition for a few of its 4,000 stock keeping units. The company declined to name the products, but the Financial Gleaner understands that only a few brands of liquors and meats are of concern.
"We have a moral obligation to our shareholders to disclose the warning," said Lowe, who became CEO of the Montego Bay-based company in June.
The warning remains a rare disclosure by a listed company in Jamaica. Dr Lowe said it "raises the bar" for higher corporate governance and transparency.
"It is a bold step. It is unfortunate that the profit warning could not come with more detail because the auditors have not yet finished assessing. We feel it was a prudent thing to do. It is not the norm in Jamaica, but we have an obligation to advise our shareholders."
CPJ stated in the notice on Monday that it views these issues as material primarily for the fiscal year ended June 2016 and anticipates the authorities will aggressively target the unregulated players, going forward. CPJ says it will write down aged or obsolete inventory arising from unregulated competitors. And, it will increase its tax provision in anticipation of a realignment of CPJ's business model.
Lowe said the company expects to cash in on business from another round of hotel developments to come on stream over the next 36 months. This is expected to boost CPJ's market share.
CPJ states, however, that its top focus in this fiscal year, that started July 1, is on rationalising non-core businesses and a realignment to address the year-on-year increase in costs associated with their rapid growth and new investments. The company will also protect its profitable lines of businesses, he said.