Camilo Thame, Business Reporter

The Jamaica Stock Exchange

Despite a mixed macroeconomic environment charac-terised by some recovery from the cement crisis, which dampened growth in the previous two quarters, just about two-thirds of listed firms returned better financial performances during the three months to September 2006 than the matching period the year before.

Sixteen of the 25 listed firms, or 64 per cent, that have filed September quarter financial statements with the Jamaica Stock Exchange (JSE) saw their profits climb above the comparative period last year, as revenue growth outpaced rising cost.

Compared, the stock market during July-September saw monthly trades decline from an average of 4,121 transactions per month to 2,833, a 31 per cent fall, while the average value traded per month dropped from $1.4 billion to $1.07 billion, a 23 per cent decline.

The JSE main index, however, moved up by 1.3 per cent from June 30 to September 30.

Of the firms that saw increased profits almost all saw their income grow at a faster pace than expenditure with three - Montego Freport, Lascelles and First Jamaica Investments - registering a reduction in expenses.

Regional conglomerate, Grace-Kennedy saw its net profit decline by just over 10 per cent to $425 milllion but its two largest divisions in terms of revenue - food and retail, which have been reeling from the cement crisis, saw some recovery, although not up to projections.

"Food trading performed below expectations due to the soft market place which resulted from low consumer demand and the consequent pressure on margins," said the company in its report to shareholders for the quarter.

Food trading saw an eight per cent increase in pre-tax profits for the quarter, yielding profit before tax of $56 million from revenue of $3.3 billion.

Significant improvement

Retail had more significant improvement, with 244 per cent increase in pre-tax profit to $54 million from revenue of $2.8 billion.

Hardware and Lumber, a subsidiary of GraceKennedy that operates under the retail division, had an improvement in its performance, "despite the continu-ing shortage in the supply of cement," said its report to shareholders.

The retail division is to be joined with food December 1, but H&L will fall under the new investment division.

During the review quarter, H&L's net profit went up by 41 per cent to $14 million. This was made from revenue of $1.45 billion, which was 10 per cent higher than the corresponding quarter.

The regularisation to the supply of cement to the local market at the end of September was credited with some of the recovery, "with importation of a substantial quantity, which has closed the gap between demand and local production," added H&L's report.

Caribbean Cement Company, the single local cement manufacturer saw more than 400 per cent improvement in its profit during the quarter having racked up $360 million net loss over the four quarters to June 30 this year.

Carib netted $153 million profit a considerable improvement over the $50 million loss it sustained during the comparative quarter last year.

The improvement for Carib was in large part due to a 15 per cent average price increase across its products in July - the last of three within a year - which translated into a 26 per cent increase in revenue on 5.5 per cent increase in cement volume sold.

CCC's sales volume increased from 203,449 tonnes in the three months to September 30, 2005 to 214.690 tonnes for the quarter under review, but year-to-year comparisons of the quarter showed a 26 per cent jump in revenue to $1.83 billion during the three months.

Berger was not as fortunate as H&L or Carib, in its recovery from the crisis.

The paint manufacturer took a hit during the quarter - its revenue increased by a mere eight per cent to $298 million, which, placed against higher costs, translated into a 71 per cent reduction in net profit to just under $4 million.

But Courts, which focuses on furniture and appliance sales, saw its profit go up by 9.4 per cent to $181 million despite the softer market, but it attributes a large part of its improved performance to the quadrennial world football competition which took place in July 2006, plus continued sales momentum to the end of the quarter.

"The company continued its strong promotional offerings to the public who responded well, with a significant improvement in sales in both August and September," said Courts in its report to shareholders.

FINANCIAL SERVICES

GraceKennedy's information and financial services division both reported declining performance.

The information division, under which Bill Express and Western union operates, saw profit before tax drop from $118 million in the September 2005 quarter to $11 million during the period under review, largely due to "provision of $185 million for outstanding receivables."

But it was the slowed macro-economic environment which caused the conglomerate's key performer to see a marginal two per cent decline in pre-tax profit to $332 million.

"The financial services division reported mixed results due primarily to a challenging macroeconomic environment which resulted in slow growth of the overall banking and investment industry," said GraceKennedy.

The financial statements filed so far to the local stock exchange by listed financial institutions showed a mixed bag of results, with National Commercial Bank and Jamaica Money Market Brokers showing worsened profit margin during the quarter.

Mayberry Investment and Dehring Bunting and Golding achieved higher profits during the review period when compared to the corresponding period last year - 142 per cent to $50 million and 28 per cent to $192 million, respectively.

Capital and Credit Merchant Bank made net profit of $181 million, flat when compared to the comparative period last year.

For NCB, the effect of change in valuation of the policy contracts of its life insurance subsidiary had reduced its costs during the September 2005 quarter by $347 million; plus "The impairment loss in Dyoll Group Limited was reduced by $299.4 million as the Group recognised an overall share of loss in associates' of $326.6 million in the prior year's quarter," according to NCB's report to shareholders.

This resulted in a 22 per cent cut in overall expenses last year, which translated into higher profit then, or a 23 per cent decline in profit to $1.58 billion during the review quarter, which otherwise would have been a flat performance for the commercial bank.

Jamaica Money Market Brokers took the biggest hit during the quarter, it saw a 70 per cent decline in operating revenue net of interest and administrative expenses, from $320 million to $188 million, resulting in a 65 per cent reduction in net profit to $154 million. The stock price dropped $1.39 in trading Thursday to $9.70.

JMMB's associated firms and its exposure outside of Jamaica, which in recent times have bolstered the merchant bank's performance, helped drag down profits even further.

"At the Group level, however, the results were negatively impacted by subsidiaries and associated companies' contribu-tions," said the firm in a report to shareholders.

"In this quarter, one-time expenses totalling J$17.9 million related to international expansion activities also impacted the group's results. Associated companies were negatively impacted by increasing interest rates and a downturn in the equities market in Trinidad and Tobago. The share of profits from these entities decreased by 83.9 per cent to J$53.9 million for the current six-month period."

Unlike JMMB, Goodyear fared better outside of Jamaica than domestically during the quarter. The tyre company increased its revenue from domestic sales by 10 per cent to $192 million but saw a 27 per cent growth in revenue to $131 million from its operations in the Eastern Caribbean.

Rising cost, however, turned the higher turnover into less operational profit - 132 per cent less in Jamaica and 21 per cent less for the rest of the region.

$500M FOR JPS

But higher costs, which on average rose by 11 per cent across the 25 listed firms during the quarter, meant that firms such as local light and power company Jamaica Public Service (JPS) could return higher margins.

JPS achieved a 200 per cent increase in net profit from $169 million during the September quarter last year to $509 million, from a 17 per cent increase in revenue to $12.7 billion.

Other utilities such as Cable and Wireless Jamaica returned signifi-cantly higher profits. C&W made $523 million during the quarter or 44 per cent higher than the comparative period in 2005.

The telecoms service provider attributed its improved perfor-mance to a 30 per cent increase in mobile revenues and 77 per cent increase in Internet revenues during the review quarter. Placed against a decline in fixed line rental charges due to lower number of subscribers, revenues went up by 14 per cent.

Kingston Wharves, whose performance tends to sway with the overall economic environment, saw its income go up by 38 per cent to $632 million, having increased the amount of cargo handled during the quarter to 571,651 tonnes, or 37 per cent higher than the comparative period last year.

KW is currently undergoing a $2 billion expansion of berths eight and nine to accommodate larger vessels and improve cargo handling capacity.

camilo.thame@gleanerjm.com