By Dennise Williams, Staff ReporterJAMAICA Broilers Group Ltd. (JBGL), headed by Robert Levy, experienced an 'egg-ceptional' increase in net profits of 42 per cent for the third quarter ending January 10, 2004, compared to the previous quarter in 2003.
Net profits were $125 million for the most recent quarter compared to the $88 million earned in the corresponding quarter of 2003. This increase was hatched through the combination of increased sales, increased operating efficiency, prudent debt management and realisation of profits on investments in the Jamaica Stock Exchange. According to the unaudited third quarter results, "The Group's turnover for this quarter, when compared to the corresponding period last year, showed an increase of 20 per cent to $1.99 billion, while gross profits increased by 19 per cent to $506 million."
Interestingly, the cost of sales in the 2004 third quarter was $1.5 billion, a 21 per cent increase over the same quarter in 2003. States the company, "The relative stability in the foreign exchange rate during the quarter was an important contributor to our performance levels. The results were also impacted positively by continued efficiency improvements in the production of poultry."
However, for JBGL the distribution and administrative costs increased by 10 per cent, which the firm blames on inflation. For the calendar year ending December 2003 national inflation stood at around 14 per cent. Another potential sore point for the company is the cost of its imported and local components. States the company, "Significant increases in the cost of grains imported from the United States, and the cost of cattle purchased from farmers forced us to implement price increases on all products during the quarter." Not to sit on their roost, the company has plans to ameliorate the potential pricing shocks that they have to pass on to consumers.
Peter DePass, corporate secretary to the Group, reveals that, "We have taken steps to negotiate a fixed rate with our suppliers and with our shippers to control our costs. In fact, we have seen our shipping costs go down. Our plan is to order larger quantities of grains and increase our storage facilities to maintain costs."
PROUD OF REDUCTION
Still, the company reports that retained earnings for the quarter grew by 22 per cent to $1.1 billion with the shareholder's equity increasing by 14 percent to $2.6 billion. The company also proudly states that, "Net finance costs, when compared to the corresponding period last year, showed a 69 per cent reduction. This very positive change is a result of the Group being essentially 'debt free' with interest bearing liabilities being matched or surpassed by interest bearing assets. In addition, the foreign currency component of the investments serves to limit our exposure to exchange rate fluctuations."
The numbers bear this out. Current assets, (which are the most liquid assets), of $2.3 billion cover current liabilities of $1.4 billion sufficiently by 1.6 times. Also, long term debt decreased marginally by 0.48 per cent. Giving more insight into the numbers DePass states, "Last year we sold our stake in Capital and Credit Merchant Bank. The proceeds from that sale were converted to U.S. dollar investments. We try to reduce our expenses to long-term liabilities. Currently our interest cost on long term debt is 11.77 per cent which is an aggregate of U.S. and Jamaica dollar debt."
Mr. DePass reveals that Jamaican dollar debt attracted interest in the 13-20 per cent range with U.S. dollar debt attracting interest of 5.5 per cent. In addition to debt management, the company has not placed all their eggs in one basket, as their income stream comes from many sources other than chicken sales. The Jamaica Broilers Group consists of subsidiaries such as:
Jamaica Egg
West Indies Nutritional Co-op Ltd.
Hi Pro Farm & Garden
Content Beef
Best Dressed Fish
For the rest of the year, DePass tells the Financial Gleaner that "We hope to exceed our profits that we made last year. Last year's profit was derived from the exceptional item of our sale of Capital and Credit shares. We see this year as a turn around where sales will drive profits."
