Honey Bun sets new sales record above $1b for first time
Bakery outfit Honey Bun Limited made $140 million in net profit for its full year ended September, which doubled the results from last year amid a spike in core revenues.
The rise in profit also comes as the company achieved a milestone, surpassing a billion dollars in annual sales for the first time.
Revenues overclimbed 34 per cent to $1.2 billion, while expenses, at $385 million, grew at a lesser pace.
"The rise in revenue is a combination of elements, including cost-cutting measures, reinvesting in our business infrastructure, and strategic sales and marketing actions," said chairman, Herbert Chong. "As a growing company, we maintain a positive attitude. We make continuous improvements for sustainability as we move towards our vision of becoming Jamaica's leading provider of high-quality baked and snack products globally," he told the Financial Gleaner.
During the financial year, Honey Bun reduced its long-term loans and bank overdrafts from $51 million to $15 million, putting the company - which was founded and is operated by the Chong family - on a path to being debt free. Its gearing ratio dropped from 12 to 3.1 per cent over the period, due in part to the 28 per cent expansion of its equity base to $471 million.
"During 2016, the company's strategy, which was unchanged from 2015, was to maintain the gearing ratio below 25 per cent," said auditors McKenley & Associates in the financial report released this week.
During the financial year, investors in the listed bakery company benefited from a tripling of the stock price, which traded at $5.83 on Thursday.
In November, Herbert Chong revealed that last year, the company embarked on a circuitous probe, involving the police's organised crime unit and other agencies into an imported product similar to its popular pastry Goldie, a cream-filled cake. The bakery is claiming infringement of its intellectual property rights from a rival product called Today Goldies, imported from Turkey, at a time when it is pumping capital into its operations, and is anxious to safeguard its market share.
They have not been able to pinpoint the local distributor, and on Wednesday, Honey Bun management indicated that there were no new developments in the probe.
Honey Bun plans to spend nearly $100 million on a 10,000-square-foot warehouse and underground water tank aimed at increasing its storage by 25 per cent. The bakery will finance the upgrade with a mixture of cash from operations and debt it held 72 million in cash and equivalents for the full year. Some $74 million of the capex will go towards developing the warehouse and $20 million for the water tank.