CPJ punch-drunk from bad March quarter - Counting down to tourism’s return
CARIBBEAN PRODUCERS Jamaica, CPJ, racked up over half-million in losses in the March quarter due to the lockdown of tourism businesses, a sector from which much of its income flows.
The COVID-19 pandemic derailed the earnings of the company, coming right after what it said was a record quarter, and is readjusting its budget to reflect the changes in the market.
Sales for the company topped US$32 million in the December quarter, a record for the period and the first time CPJ was batting above US$30 million of revenue in any three-month period since its listing on the stock market nearly nine years ago.
But then large Western economies, which are the source markets for tourists for Jamaica and the Caribbean, began reporting COVID-19 cases.
“The relative softness of January made me wonder. February was just okay, but for March we were on our way to record performance when everything stopped abruptly,” said CPJ executive chairman Mark Hart.
Jamaica reported its first coronavirus case in early March. CPJ closed the quarter with a more than US$1.5-million fall in revenue, year-on-year, from US$28 million to US$26.45 million; and losses of US$520,000, a decline from a profit of US$150,000 in the comparative March 2019 period.
“We had 62 containers of product coming to Jamaica for the hotel industry when the customers all closed their doors. We therefore had to deal with receiving all of these products and not having any way to generate income. For that month, there was probably US$500, 000 of net loss when, in reality, we should have had the same amount in profits,” Hart said.
Around 90 per cent of CPJ’s business comes from about 250 of its 2,700 key customers, he said.
Left with US$25 million in inventory and high levels of receivables, the company took to social media with a marketing campaign to sell off mostly perishable items.
“Our social media following grew from 14,000 to 23,000 in six weeks,” Hart noted. "Collecting receivables and selling off inventory is generating a lot of cash for us, because we are selling at cost and doing a service to the community."
Meanwhile, senior managers have taken pay cuts ranging from 20 per cent to 50 per cent, he said, and staff were being laid off as cost-cutting measures.
The chairman said CPJ’s balance sheet will take a hit, but felt fairly secure that the company’s level of capitalisation – about US$5 million in share capital and another US$17 million in accumulated surplus – was sufficient to weather the fallout.
“If we wanted to, we could sit like this in this position for well over a year. The balance sheet would be taking a hit, but we would be able to survive,” he said.
He added, however, that the company was banking on news that its key markets of Jamaica and St Lucia were getting ready to reopen and as such, regular operations may resume soon in those markets.
St Lucia had a low number of COVID-19 cases and no deaths at the time of the interview. Jamaica had more than 500 cases and nine deaths.
“What we do know so far is that in St Lucia, where we have our other operation, they already have flights on for early June, and, personally, I think Jamaica cannot be far behind,” Hart said.
Prime Minister Andrew Holness has since announced that the work-from-home order would be lifted on June 1, or more accurately, the order would not be extended beyond its May 31 expiry, moving the country towards the gradual reopening of the economy.
Hart says CPJ will be ready for the reopening of the tourism market with a newly developed warehouse management system and new logistics software, along with pricing and ordering software.
“We’re not worrying about results at this time. There’s nothing that we can do about that. CPJ has the inventory and cash; the receivables are looking good, the payables are not dragging, and my bankers have been good to me; it is now for my strong team to execute on the post-COVID strategy,” he said.
The company is now projecting that it will likely hit just 65 per cent of its initial sales target, and is adjusting its budget accordingly.
“We’re gearing ourselves and doing all the budgeting, making the adjustments, and we just have to come back knowing that it’s not going to be business as usual. While I’m energised by the prospects, I am scared at what has happened, to the extent we are in the realm of the unknown; but I have to look at it as an opportunity to doing everything we ever wanted to do but didn’t have time to do,” Hart said.