Tue | Sep 22, 2020

JP farms to scale up production as fixed costs bite

Published:Monday | June 25, 2018 | 12:00 AM
Jeffrey Hall, managing director of Jamaica Producers Group Limited.

Jamaica Producers Group Limited, JP Group, is investing millions to expand output at its farming operation in St Mary, while going after additional markets in the tourism and retail sectors.

Hall told the Financial Gleaner that the farm, operated under subsidiary JP Tropical Foods, aims to increase pineapple yields using lands already owned by the company.

"That sees us adding 30 acres per year of pineapples in St Mary to complement our existing banana business," he said, but did not indicate the length of the programme.

The company is investing $30 million in the first 30 acres this year.

The pineapple fields currently span 100 acres, or a quarter of the size of the banana fields at 400 acres. Hall said the two farms, banana and pineapple, are separate but adjacent.

The market for pineapples is about 25 per cent of that of bananas, but is growing more rapidly.

Earnings from JP Farms are not enough to cover its fixed costs, JP Group disclosed in its latest annual report. The company also stated that the farming business entered 2017 with major supply issues. Hall stated that year that the company had plans to grow yields by 17 per cent.

"Adverse weather and other growing conditions during late 2016 led to significant downturn on banana yields that whilst being arrested in early 2017 with management and process changes, impacted the first nine-month crop cycle of 2017. As a result, revenues were down 20 per cent," the report stated.

JP also noted that with the nature of the farm being predominantly a fixed-cost operation, the revenue decline bled to the bottom line, "meaning losses increased substantially on the prior year". However, the report did not quantify the losses.

The report noted that there was a return to full supply in the final quarter of 2017, but only partial recovery was expected this year. Consequently, the company noted that long-term profitability was "still some way off" and would take an expansion of crop volumes to cover overheads.

Hall asserted that the business would eventually be able to cover its costs.

"JP will achieve an overall growth in its fresh produce business with increased revenues and gross margins to cover overheads. This added contribution is part of an overall strategic plan that includes improved state-of-the-art cold storage and distribution, and improved brand marketing," he told the Financial Gleaner.

JP invested in cold storage and distribution of fresh produce in 2017, which has already led, Hall said, to "improved quality and increased sales" for farm produce in the hotel sector. Earlier this year, the company also rolled out a branding programme under which all its fresh produce now wear the 'JP St Mary's' label.

Said Hall: "2017 saw challenging yields due to difficult weather conditions. We have improved the overall infrastructure on the farm, including both irrigation and drainage. We are diversifying the crop base to expand in pineapples. We are improving cold storage and distribution to improve quality and reduce waste."

For this year and beyond, he added, JP would be attempting to deepen its penetration of the hospitality market locally and sell more bananas to regional markets.

The company already distributes bananas to Cayman Islands, and had previously indicated plans to sell pineapples to that market.