Lavern Clarke, Business Editor

jamaica Producers Group Limited (JPG) has declared record year end profits of $2.6 billion to December 31, quadruple its position in the year prior when it made $461.6 million.

The strong gain in income for 2006 was a one-off event for the conglomerate, which sold off its majority stake in one of its United Kingdom (UK) businesses for $2.34 billion.

Without that income, JPG might have seen a drop in profit levels by 41 per cent to about $273 million its earnings statement indicates.

After tax profit from continuing operations was $205.8 million compared to $248.8 million in 2005, and from discontinued operations, $67.1 million compared to $212.7 million.

Skewed picture

But, as JPG chairman Charlie Johnston points out in his statement to shareholders, the results for discontinued operations are truncated. A direct comparison, therefore, gives a slightly skewed picture.

"It should be noted," said Johnston, "that the 2006 results include JPFD for the 40-week ended October 7, which was the effective date of disposal; the 2005 results is for the entire year."

In the last calendar quarter JPG, whose businesses cover banana, shipping and food processing, accepted a buyout offer from minority partner Dole for its majority 65 per cent stake in Jamaica Producers Fruit Distributors Limited (JFPD).

The deal pumped the agro-business company's revenues to $13.4 billion - a 27 per cent increase from $10.5 billion the year before - and flowed into the bottom line, resulting in boosted shareholder value of $15.12 earnings per share, comparedto an EPS of $2.22 in 2005.

The company's profitability levels rose as a result to a 19.6 per cent net profit margin, compared to 4.4 per cent in the year prior.

New business

JPG has been in acquisition mode, wrapping up purchase of at least two companies in 2006, is building out its snack business in Jamaica, and is pumping new capital into its food processing segment. Meantime, its banana operation in Honduras is 'emerging'.

"We made substantial invest-ments in new plant and equipment at Sunjuice, our U.K. juice and smoothie business," said Johnston in his statement to shareholders.

Those activities are reflected in a near doubling of long-term debt to $1.08 billion, from $558 million in 2005.

On Wednesday, JPG's Chief Operating Officer Peter Morris told the Financial Gleaner that those loans were largely to finance the Sunjuice expansion.

JPG's discontinued operations represented just under $16 billion of annual revenues.

JPG admits its performance was below par in 2006, and so the sale of JPFD would have added needed steroids to pump up the company.

But with its banana division - which employs 1,200 persons in JPG's markets and pulled in just under 40 per cent of total revenues last year - still feeling the effects of import regime changes that removed quota-based restrictions on banana traders supplying the European Union (EU), JPG's expectations for 2007 are not bright.

"Our operating performance was weak, said Johnston, "and trading conditions remain difficult in the near term."

The banana division's profit in 2006 fell to $44.6 million from $91.7 million the year before.

Alongsid competition, JPG's banana business also faced higher production costs for cartons, transport and pest control, and higher port costs "associated with a shift of Jamaica's export operations to Kingston from Port Antonio in order to accommodate larger vessels."

This week, it also emerged out of Geneva that the new challenge launched by Ecuador and Colombia over the revised EU bananaimport regime is likely to cause even more upheavals for the Caribbean's banana trade.

By investing in Honduras, JPG would have covered some of its exposure to the competition posed by Latin American producers.

The company's long term outlook, however, is "optimistic", partially due to a restructuring and corporate rebranding that the group plans to undertake this year.

Jamaica Producers Group (JPG)

Share Price:$28.08

Market Cap:$5.25 billion

Assets$14.2 billion

Revenue$13.3

Profits$2.61 billion

Profit Margin19.6%

Current Ratio2.28

lavern.clarke@gleanerjm.com