Ashford Meikle, Business Reporter

Byron Thompson (right), Seprod group managing director, in discussion with chairman A.D. Blades. - Junior Dowie/Staff Photographer

Facey Commodity suf-fered a $136 million loss in its German-based Mobile Virtual Network Operation (MVNO), last year, causing a drop in Seprod's earnings from associated companies, according to the managing director of Seprod, Byron Thompson.

"Seprod's share of the results of associated companies are down by 42.6 per cent, moving from $257.4 million in 2004 to $147.7 million in 2005," said Thompson Monday at the company's annual general meeting.

Seprod's associated companies include Facey Commodity/ Gatcombe as well as its Xerox operations in the Dutch Antilles and the Dominican Republic.

In his message to the shareholders in the annual report, Thompson said the loss was attributable to the "establishment of the MVNO in Germany by Facey Commodity."

European market

Earlier this year, Facey Retail Solutions, the Miami-based sub-sidiary of distributive con-glomerate, Facey Commodity, announced plans to expand its telecommunications business in the European market with the launch of an MVNO to be made available in the Wal-Mart stores in Germany - capitalising on the retail chain's presence in that European country.

An MVNO, or mobile virtual network operation, is essentially a company which has a contract to use the existing network of other mobile service providers. It bundles and resells minutes to customers under their own brand.

With little or no physical infrastructure, the company does not own a licensed frequency spectrum.

The plan, part of Facey's strategy to diversify its earnings, is extremely popular in Europe, particularly with Virgin Mobile.

However, at Seprod's AGM at the Knutsford Court Hotel in New Kingston, chairman Desmond Blades declined to give the reasons for the MVNO's loss-making operations.

"I think it is far too early to even guess at that," Blades told shareholders. "We have some [issues] in Germany which have to be resolved and it is far too early to assess how we are going to resolve them and at what cost, if any."

It is not known what effects, if any, will arise from Wal-Mart's decision last July to quit its operations in Germany and sell its business to the German company, Metro AG. Wal-Mart's operations in Germany have been sustaining losses for some time.

Expand dairy

At the AGM, Thompson, spoke of Seprod's plans to expand its dairy operations with the recent acquisition of the 2,300-acre Belvedere Farm in St. Thomas which will allow it to expand its dairy herd by an additional 1,800 heads.

"The primary reason for acquiring this property is to expand our dairy herd ... We looked at Serge Island and saw where expansion was limited so it was strategic for us," said the managing director.

"We envisage that, based on the rate of growth of our own calves, we should be able to achieve this in four years. If we can get mature animals we should be able to do it in less than four years."

Seprod produces about five million litres of milk annually and Thompson suggested the market could support another five million litres.

For its financial year to December 31, 2005, Seprod earned net profits of $750 million on revenues of $3.9 billion, for an approximate 19 per cent profit margin. Facey's revenues topped $24 billion and its profits $181 million in 2005.

While Seprod's revenues increased by 18 per cent, there was a 37 per cent jump in net profit, principally as a result of $247 million negative goodwill on the acquisition of Serge Island Farms.

- ashford.meikle@gleanerjm.com