Salada sheds spices, property and pension plan
A double-digit spike in revenues was enough to create record turnover at Salada Foods Jamaica Limited, but not enough to budge the profit needle, and now the company is planning to exit the spice business - a non-core operation that has been a drag on its bottom line.
The coffee-processing company also fell well shy of its ambitious billion-dollar sales target, which General Manager Dianna Blake Bennett linked to underperforming exports.
"We benefited from a strong performance in the local market, but were unable to regain ground on export sales lost in the first quarter of the fiscal year," Bennett told the Financial Gleaner.
For the year ending September, Salada built its sales by $110 million or 14.46 per cent to nearly $872 million. However, its bottom line was pressured mainly by pension costs and an underperforming subsidiary, which served to marginally depress profit to $68.7 million compared with $68.9 million in 2016.
Salada is crediting new distribution partner, LASCO Distributors Limited, as well as its own targeting of a younger demographic - with Mountain Peak flavoured coffees and through active engagement on social media platforms - for the uptick in sales.
The flat profits meanwhile, were attributable to $55.19 million of write-downs. The majority of those costs, $34.9 million, resulted from the winding up of the company's defined benefit pension scheme, which was terminated on August 31.
Blake Bennett says the 13 pensioners and 3 members in the small pension fund meant that "it was not cost effective to continue" and that the $83 million of assets in the fund were distributed solely to the pensioners and plan members. Salada now facilitates staff members to open individual retirement accounts - IRAs - to which the company contributes five per cent, she added.
Sales challenges at spice subsidiary Pimora Company Limited also weighed on Salada, resulting in a $10.56 million hit; while the other writedowns related to obsolete stock, $5.7 million, and real estate property in Kingston, $4 million.
Blake Bennett says Salada is exiting the spice business and has already commenced the process of winding up Pimora.
As for its food processing subsidiary, Mountain Peak Food Processors Limited, Salada is bullish on its prospects, and is in the process of acquiring the 0.2 per cent stake held by minority interests to take its holdings to 100 per cent of the company.
Meantime, the coffee company has sold property at Norwich Avenue in Kingston, including land and building, to Carita Limited for $39 million, Blake Bennett confirmed to the Financial Gleaner. The property was valued at $43 million on Salada's balance sheet in 2016, leading to the $4 million write down from the disposal.
In the year ahead, Blake Bennett said Salada expects to make more gains on sales, including exports, for which the ground work is ongoing.
"We anticipate strong performance in the local market and our plans to grow exports are afoot. We have acquired SQF certification which gives us a greater opportunity to expand our export reach," she said.