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Lasco Manufacturing to roll out new products - Profit dips in first quarter

Published:Wednesday | August 3, 2016 | 8:00 AMSteven Jackson
Robert Parkins, managing director of Lasco Manufacturing Limited.

The rapid uptake of the iCool drink was a primary driver of the $1.5 billion worth of new beverage sales for Lasco Manufacturing Limited (LML) for year ending March 2016.

Profits shot up by one-third in the year, from 15 cents to 20 cents per share, and the company expects its bottom line to grow further this year with upgrades to capacity at its St Catherine-based plant.

"Several new products are scheduled to come on stream in this financial year once the increased production capacity is achieved later in this year," said LML in its newly released annual report.

"We are optimistic about the future of this plant and the anticipated growth in profit."

So far, however, supply hiccups and taxes have constrained profit in the first quarter. LML said it experienced challenges in its supply chain linked to its overseas partners, which, in turn, affected its ability to meet demand.

Pre-tax profit nevertheless rose by nearly $10 million in the June 2016 first quarter, but net profit contracted from $246 million to $224 million after a tax bill of $32 million, compared to zero tax in the comparative 2015 quarter. LML previously had a 100 per cent waiver on corporate taxes for five years, but now that has been cut to 50 per cent, in line with junior market rules.

Expenses spiked by $85 million in the June quarter, some of which the company said was spent on new product development.

On a yearly basis, the liquid beverage line now accounts for nearly a quarter of the $6.6 billion in total annual sales at LML. In FY2016, the company earned net profit of $826 million, an increase of $214 million or 35 per cent over prior year.

"This result is mainly related to the continued impressive performance of the liquid beverage line with sales of $1.9 billion, an increase of $1.5 billion or 369 per cent over 2014/15," stated LML in its annual report.

LML's dry or powdered beverage division recorded what management termed a "respectable" increase of $500 million or 13 per cent.

 

Favourable performance

 

"The favourable performance of both the liquid and dry beverage product lines offset the less-than expected performance in the export sales for the year," said the company, whose exports dipped by more than a third.

It represented one of the few weak areas for the company.

Export sales totalled $318 million, down 37 per cent.

"Contributing to this decline in [export] revenues was the significant reduction in sales to Canada and Haiti, which together normally account for 40 per cent of the overall export market. Sales to these markets have been affected by tighter credit controls imposed by the company," said LML.

On April 1, Lasco Distributors Limited became the exclusive distributor of LML for the export market. LML expects the move to drive export growth.

"When we launched iCool, although we had anticipated an immediate public affinity to the product because of its taste and value, its performance on the market surpassed our initial projections. The demand for the product continues to exceed the supply, and we have quickly moved into further expansion plans with the installation and commissioning of a new production line," stated LML.

"Production capacity at the liquid plant is now at its peak after investing US$5 million in equipment during 2014/15, and profits have since been improving. During this year, we spent an additional US$4.5 million on new equipment, which will double production capacity," stated the company.

steven.jackson@gleanerjm.com