Blue Power soap prices inflate as dollar falls
Blue Power Group Limited will be increasing the prices for its soaps due to the effects of currency movements on its cost of business, but that's after making millions in currency gains from its financial holdings.
The soap maker expects to adjust its soap prices this month.
"We adjust our prices a little bit when the exchange rate moves so, for example, starting this month, our soaps will go up by four per cent locally due to the devaluation," said Blue Power Chairman Dhiru Tanna on Tuesday.
The group holds some US$2 million as cash or liquid assets, the bulk of which, US$1.2 million, is held as a corporate bond. The Jamaican dollar has lost $12 of its value or nearly 10 per cent year to date. For Blue Power's first quarter ending July, when the dollar closed above $135 against the USD, the company made $22 million in foreign exchange gains due to the depreciation, said Tanna.
"We sell soap and lumber, but some of our fortunes depends on the vagaries of the exchange rate," he said.
Blue Power made $102 million in net profit on revenues of $1.5 billion for the year ended April 2018. Sales grew eight per cent over the year, but profit fell 16 per cent.
The company announced plans this week to launch new soaps in 2019, and adjust prices further to offset local currency depreciation and regional challenges. These include foreign exchange movements in Jamaica, job losses in Guyana and a flat economy in Barbados.
"We are looking for new prospects and developing new products as far as the soaps are concerned. All of that will come," Tanna said.
Roughly 21 per cent of total sales are from exports to Guyana, Barbados and other Caricom countries. However, sales in top export market Guyana are slowing, the chairman said, due indirectly to the planned divestment of the Skeldon Sugar Estate by the government there.
"Before the privatisation they let a number of people go," said Tanna who estimates job losses at close to 10,000. "They have no work and their income has disappeared. Our soap sales have died," he told shareholders at the company's annual general meeting in Kingston.
At the same time, increased competition from other soap traders in that market has resulted in Blue Power cutting prices to maintain volume sales.
"So you will see the top line go down even more but I am hoping that while we maintain a presence in the market that they will remember our name and that they like the soap and buy it when times are better," Tanna said. However, the oil find there should see purchasing power rebounding within the medium term, he surmised.
As for Barbados, distributors there are reluctant to commit to large quantities due to the economic fallout in that country.
Blue Power shareholders voted Tuesday on a 10 for one split of the company's shares, paving the way for the expansion of the company's authorised capital to 990 million shares and issued capital to 564.9 million shares, effective August 29.
"The argument for the split was that there was not enough shares for purchase," said Tanna "Some people would tell me that they would not buy any local shares above $5."
At the split, the BPOW stock will also trade at one-tenth its value - a price that would be closer to the $3.80 at which it listed back in 2010. BPOW is currently worth $40 per share.