Jamaica Producers basks in the glow of logistics investment
The disposal of its coffee investment and the reclassification of a subsidiary resulted in a sevenfold increase in annual profit for Jamaica Producers Group, its yearly results show.
But even stripped of those one-off events, the food and logistics conglomerate would still have boosted profit, even as expenses soared.
Group Managing Director Jeffrey Hall said the increased expenditure was a natural outcome of the move to bring its stake in port company Kingston Wharves Limited (KWL) on to the books.
KWL was reclassified from an associate company to a subsidiary of Jamaica Producers, which is the top shareholder with direct and indirect holdings of 44 per cent per cent of the port company and has substantial control of the board.
"Both the increase in cost of operating revenue and that of administrative costs have to do with the cost of bringing Kingston Wharves on board, and other strategic moves made through the year," said Hall, who is also chairman of KWL.
"Of importance is the fact that the level of increase in expenses is outstripped by the total increase in revenue, and indeed the increase in profits," he said.
In 2016, Jamaica Producers reported profit of $4.3 billion, which included a gain of $2.9 billion from the consolidation of KWL, and $650 million from the sale of its 50 per cent stake in Mavis Bank Coffee Factory Limited. Revenue for the group topped $12 billion.
In 2015, the conglomerate made $614.6 million off revenues of $8.7 million.
BALANCE SHEET BOOSTED
The reclassification of KWL, which operates nine deepwater berths, also boosted its balance sheet, with the group's asset base increasing from $10 billion to $30 billion.
Chairman of Jamaica Producers Charles Johnston said the group is also reaping the rewards of a series of initiatives, including investment in the business of logistics in a nod to the KWL operation, and strategy to build a diversified international speciality food and drink group through acquisition.
"Our strategy has been very successful when measured in terms of its return on investment and the overall accretion to the net equity of JP shareholders," Johnston said in remarks appended to the financials.
Jamaica Producers operates two divisions: Logistics & Infrastructure, including businesses engaged in terminal operations, freight forwarding and logistics; and Food & Drink, comprising companies engaged in farming, food processing, distribution and retail of food and drink with production facilities in Europe and the Caribbean.
The logistics division delivered revenue of $4 billion. Johnston pointed to strong business performances from both KWL and UK-based freight forwarder JP Shipping Services. KWL benefited from growth in its domestic and trans-shipment cargo movements, and its services as a regional hub for motor vehicles, he said.
The group also has approximately 200,000 square feet of warehousing, cold storage and offices in use. An additional 160,000 square feet of warehousing and offices are under construction, with completion scheduled for this year.
Looking ahead, Hall told Gleaner Business that JP is "bullish about the prospects on the logistics side", and that the outlook for food is also positive. Still, he was a bit more measured regarding the prospects for food, recognising that the division was adversely affected by weather events which put a damper on performance.
Hall said the conglomerate is coming off a good year and is on sound footing.
"2016 was a transformational year for the JP Group. We confirmed that our strategy delivered real value for shareholders. Moreover, our balance sheet is strong, and JP's core businesses in food and logistics represent diverse attractive platforms for long-term earnings growth". Hall said.