Derrimon profits boosted by acquisitions
Listed conglomerate Derrimon Trading says that it is beginning to reap the rewards for investing in its two recent acquisitions, Caribbean Flavours and WoodCats.
Consolidated results for the six months that ended June 2019 show total revenues of $6.29 billion, $2.24 billion or 55.63 per cent over the $4.04 billion reported for the similar period in 2018.
Chief financial officer Ian Kelly says that Derrimon had to borrow heavily to do the acquisitions, but that move, coupled with other elements, meant that it was worth it.
“It’s really a combination of strategies. As a company, we believe in long term. While we will incur debt expenses coming into WoodCats, we would have gone in with certain business practices and so that would have propelled growth to the extent that in three months, we are up 50 per cent for that entity,” Kelly said.
He added that despite their best efforts, the growth at WoodCats is not keeping pace with demand.
“Even with us putting in that increased capacity, we are working seven days per week and sometimes three shifts per day just to keep pace with demand,” Kelly added.
WoodCats offers a range of pallet solutions, including manufacturing for export and warehouse storage. It distributes plastic pallets and produces shipping boxes, crates, and lobster traps.
At the time of its acquisition in August 2018, WoodCats reportedly had a turnover of $450 million up to the end of 2017.
Kelly says that Derrimon has invested nearly $50 million to expand production and add new trucks. He noted that there is growth in the economy, that they are the largest supplier of pallets, that such items are integral to the manufacturing and distribution process, “and we are there to supply”.
Gross profit at Derrimon for the six months was $1.09 billion, 49.57 per cent more than the $731.57 million reported for the similar period last year. Operating expenses was $824.2 million, resulting in the Derrimon Group’s consolidated profit before tax of $186.45 million, 51.8 per cent more than the $122.82 million reported for the similar period in 2018.
Derrimon says the realignment of its debt portfolio from short term to long term amortised facilities continues to have a positive effect on the Group by way of lower interest cost.
Kelly says that while all segments of the Derrimon Group contributed to increased revenues, the parent company bore the brunt of the spending that was necessary to execute the business plan or counter the effects of the ongoing upgrade of the Portia Simpson Miller Square in Kingston from where it does business. He says in that case Derrimon has had to do more trucking to keep lines open with their customers.
“The line item cost for transportation has gone up considerably since we have to mitigate the effect of the upgrading. Since there is a difficulty for our customers to come to us we are going to them,” Kelly said.