Sat | Dec 15, 2018

Jamaica Producers profit aided by Kingston Wharves acquisition

Published:Wednesday | March 21, 2018 | 12:00 AMSteven Jackson/ Senior Business Reporter
Kingston Wharves Limited

Jamaica Producers Group (JP) made a higher profit during its 2017 financial year, once discounting one-off gains from a year earlier.

The conglomerate reported $1.62 billion in profit for its 2017 financial year, which represented a decline of 62 per cent year on year. However, the profit represented an increase of 16 per cent year on year, once discounting for a $2.91 billion gain in the 2016 financial year.

The 2016 results included gains related both to its acquisition of Kingston Wharves Limited (KWL) at $2.9 billion and the divestment of the group's holdings in Mavis Bank Coffee Factory Limited at $650 million, JP indicated in its financials.

Gross operating revenues for 2017 at JP totalled $16.15 billion compared to $12.08 billion a year earlier. Gross profit totalled $2.28 billion compared to $829 million a year earlier.

During the year, the group benefited from KWL's launching of its new logistics facilities for the warehousing of general cargo, and the storage of bulk cargo and automotive cargo for the domestic and transshipment markets. Also during the year the JP Tropical Group completed the commissioning of its cold storage and ripening facilities for its banana and pineapple business.

"This investment has significantly improved the quality and availability of our fresh produce. Our bakery and our juice plant are also undertaking initiatives in relation to new production lines that were introduced within the last 18 months. The plant and equipment and other resources associated with these investments are performing satisfactorily," stated Charles Johnston, chairman of JP, in his statement accompanying the results.

The cash flow and equivalents totalled $885.3 million, up from $632.9 million a year earlier.

JP Food and Drink segment earned $278 million in net profit before finance costs and taxation, while the JP Logistics and Infrastructure earned $2.16 billion and corporate services $149 million. During the 2016 financial year, the group's investment in KWL effectively grew with the acquisition of additional shares in the Shipping Association of Jamaica Property Limited, which itself holds shares in KWL.

The increased shareholding resulted in JP meeting the requirements for consolidating the results as at June 23, 2016. As a consequence, from the beginning of the third-quarter 2016 KWL transactions were fully included in the consolidated financial statements. Previously KWL was treated as an investment in an associated company.

On September 19, 2016, the group divested its 50 per cent joint venture in Mavis Bank Coffee Factory Limited, through an exchange of securities.

The group's total equity stands at $22.7 billion, up from $21.2 billion a year earlier.

JMMB Securities in its January assessment viewed JP as a "hold" based on it being fairly priced. JMMB estimated the fair value of JP's shares within the range of $10.06 to $15.43.

"The high end of our price range is in line with JP's most recent price of $15.00 as at January-26, 2018. We, therefore, recommend Jamaica Producers as a hold as we believe the company is currently fairly priced based on our series of estimates applied above," stated JMMB.

steven.jackson@gleanerjm.com