Blue Power grows profit as raw material prices retreat
m Group Limited (BPOW) has profited from a debt for equity swap and a turnaround in raw material prices, and says it is now set to roll-out new products by October.
The company, whose stock recently listed on the junior stock market and currently trades at around J$5 per share, has doubled its profits, from J$14.8 million to J$29 million at yearend April 2010.
Raw material inputs for soaps, including palm oil based fatty acids, dropped 25 per cent, said Blue Power chairman Dhiru Tanna.
"All necessary preparations for the launch of new products at the soap division have been completed and the second quarter will see a gradual roll-out," Tanna said in his report to shareholders.
The company plans to launch five new soaps under the Lasco brand, for which it manufactures under contract, Tanna told Wednesday Business via email from Minnesota, Minneapolis in the United States.
"We are hoping that these will help to significantly improve our sales. However, any improvement in our bottom line will depend on the acceptance of these products by the public. In the meantime, we continue to sell our laundry and carbolic soaps at levels we experienced last year," he said.
The company wants to get the Lasco order right before taking on other new projects, Tanna said.
Blue Power Group, whose holdings include lumber, racked up sales of J$696 million last year, with soap accounting for J$132 million of total turnover.
Within the coming year the company anticipates that its own branded carbolic soap will constitute a significant proportion of the Blue Power division's overall sales, although it was not immediately clear what percentage of sales is now attributed to the product.
Along with its own brands, Blue Power Group also has contracts with companies such as GraceKennedy, Lasco Distributors Limited, CariMed Limited, and H.D. Hopwood & Company to manufacture soaps at its plant on Victoria Avenue in Kingston.
The 10-year-old company has, since inception, expanded its operation mainly from retained earnings with some cash injection through shareholders' loans now to be converted into equity.
As a result of its initial public offering the company managed to retire a substantial portion of its debt. The company's debt servicing charges dropped from J$16 million in 2009 to J$8 million in the period just ended.
"Most of our own debt was from shareholders which has now been converted to equity. The impact on our interest costs has not, therefore, been significant. However, we now have a very presentable balance sheet, making it possible to apply for bank or development bank financing should we need it," said Tanna.
"Our tax free status will enable us to retain a greater portion of our profits which, in turn will allow the balance sheet to improve even more," he said.
The company is now reporting net assets of J$151 million, up from J$41 million. Its long term loans have dropped from J$24 million to zero.