Camilo Thame, Business Reporter

Fish sticks made by Jamaica Broilers being prepared for tasting at the Liguanea Club, New Kingston, in this February, 2005 photo. - File

A decision by Jamaica Broilers Group (JBG) to discontinue fish supplies to the local fast food industry in May to concentrate on tying down a vibrant market in Europe has helped the company turn a small profit for its ailing division during its July to October quarter.

Meanwhile, the agro-processor's US$5 million (J$330 million) expansion of its cold storage capacity is expected to improve the company's reach in the local market.

"The results in the second quarter reflect the change in strategy," said Ian Persard, JBG's executive vice-president of finance.

"The take up in Europe was stronger than expected. Sales in those outlets, such as Tesco and Sainsbury in the United Kingdm, were 30 per cent more than anticipated. Future growth in the European Union and U.K. will be considerably higher than in the United States."

Broilers made $2 million pre-tax profit from its fish operations during the 12 weeks to October 14, a $21 million improvement over the comparative quarter last year, when the company made a $19 million loss.

Revenues grew by 19 per cent over the corresponding quarter in 2005, from $98 million to $117 million during the period under review.

In prior years, the agro-processor has not been able to turn a profit from its fish division, making a $59 million loss from $347 million in revenue during the year ending April 29, 2005 and a $127 million loss from $517 million in revenue for the year ending April 29, 2006.

For the year to October 14, Broilers lost $6 million from $209 million in revenue, but Persard expects the company to break-even or turn a small profit should the trend remain the same for the rest of the year.

Overall, the entire group made $132 million net profit from $2.45 billion of revenue during the quarter, representing an 11 per cent increase in net profit from a 10 per cent increase in revenues.

Poultry division

The core business, poultry processing, saw a 4.0 per cent increase in revenue, but saw a marginal, or less than one per cent decline from $209 million during the comparative quarter last year to $207 million during the review period.

"The poultry division is not going to grow by more than three to five per cent per year," said Persard. "During the quarter, the increase in grain prices affected the poultry division. We have already taken some increases, but chances are we are going to have other increases. For instance, corn futures are now at US$4 per bushel, but the cost of our last shipment was significantly lower than that."

The higher cost of grain translated into higher locally produced feed prices, but according to Persard, the increase in prices only represented about five percentage points - or 31 per cent - of the overall 16 per cent increase in revenue.

"The opening of our 8th supercentre in White Marl has resulted in higher sales," added Persard.

Feed and farm supplies division saw a 21 per cent increase in profit, from $77 million to $93 million, from a 16 per cent increase in revenue, from $581 million to $672 million.

Overall, cost grew by nine per cent from $2.09 billion to $2.27 billion, lower than the growth rate for cost of sales which went up by 10 per cent, from $1.64 billion in the 2005 quarter to $1.8 billion.

The zero movement in the $363 million administrative cost during the quarter as a result of the one-off exceptional costs associated with the full acquisition of the cogeneration plant that was placed on the books last year, helped to drag down overall cost.

Distribution cost, however, went up by 15 per cent to $102 million, despite measures being taken by the company to lower the costs associated with getting its product to the local market.

"Currently we are undergoing major expansion of cold room at Spring Village, which meant that a disproportionate amount of product would have been stored externally and would have attracted rental costs,"Persard told Wednesday Business.

The US$5 million expansion will double JBG's cold storage capacity at its St Catherine base, from 800,000 kilogrammes of frozen product to 1.6 million kg.

The expansion is expected to lead to reduced cost of external storage, reduced incidence of spoilage, but primarily the improved accessibility of the product is expected to result in faster loading and turnaround in delivery.

camilo.thame@gleanerjm.com