Red Stripe profit shoots up 160% to $3b
Desnoes & Geddes Limited, which trades as Red Stripe Jamaica, manufacturer of a range of alcoholic brands, including beers and stouts, recorded net profit of $3.15 billion for the year ending June 2014, outperforming the previous year by 160 per cent.
Chairman Richard Byles said the "excellent" results were achieved in an atmosphere in which the company navigated a year marked by substantial economic reform, depreciation of the Jamaican dollar and tightened consumer purchasing power.
The Red Stripe strategy of brand creation, end-to-end efficiencies and profitable export growth also delivered growth of 11 per cent in sales to $14 billion and a four per cent improvement in cash flow after a $1.7-billion capital investment and $1.4-billion dividend payout, he said.
The company sold $12.7 billion of products in 2013 off which it made net profit of $1.2 billion.
Addressing shareholders at the company's annual general meeting at its Spanish Town Road, Kingston offices on Wednesday, Byles said that "in an economy that many say is difficult, volumes are up, profits are up and plant efficiency is up. We have transformed our export market to one that is now profitable," he said, adding that he was bullish about the company.
"This is a really prosperous era for Red Stripe."
In the chairman's report in the 2014 financials, Byles said that although Red Stripe's international volumes were below the prior year's, it recovered in the last quarter as a result of an aggressive drive to regain lost distribution in Britain's pubs and United States groceries.
Red Stripe Managing Director Cedric Blair attributed a seven per cent decline in export sales to the movement of production of Red Stripe sold in the United States from Jamaica to North America.
He said growth in volumes and revenues was mainly attributable to increased sales in the domestic market, efficiency through cost-saving initiatives, revaluation of the investment properties and gains from sale of shares in Brassiere Nationale d'Haiti, and Windward and Leeward Brewery.
The domestic segment of the business represents 84 per cent of net sales, up 15 per cent on the prior year, driven by sales volume on selected brands, along with new innovations launched during the year, said the managing director.
Blair said Red Stripe's sales and distribution joint venture, Celebration Brands Limited, was fully embedded and contributed to the growth. Its partner in the business is Pepsi Jamaica.
Byles said Red Stripe's positive returns and cash flow position were also a result of their continued focus on driving out costs and investing in transformational projects, including the installation of a combined heat and power plant, phase one of the brewery modernisation and a flexible packaging line, renovation of Red Stripe House and the Desnoes & Geddes conference centre, as well as its cassava-growing project.
The company's pilot cassava project at Bernard Lodge, St Catherine, has been operating to expectation "and we will be harvesting the 36-acre plot in December," he said, noting that it will provide planting material for a 300-acre plot they hope to put into production before the end of the year.
On Monday this week, Cabinet signed off on a long-term lease of 250 acres of land at Wallens, St Catherine, to Red Stripe.
Blair said the project represents Red Stripe's biggest commitment to import substitution through local raw material sourcing "and our aim of fully commercialising cassava in Jamaica".
Red Stripe is seeking to quadruple cassava yield from the current 10 to 15 tons per hectare to 40 to 60 tons per hectare.
"At this level of production, we are confident we can replace 10 per cent to 20 per cent of our imported brewing raw material by 2016," he said.
"A best in class" starch-processing facility will be built at Red Stripe's Spanish Town Road location in the third quarter of the company's 2015 financial year, capable of annually processing yield from up to 300 acres of cassava.
The company's target is to produce its first full-scale brew by substituting cassava starch for corn syrup in financial year 2015.
The pilot project will be used a blueprint to further expand the programme to 300 acres in 2015, and to 2,500 acres in three years.
Correction & clarification
In the story titled 'Historical Leap: Jamaica surges 36 places in Doing Business rankings', published on October 29, 2014, this clarifies that Jamaica's movement up the rankings from 94 to 58 was under the 2014 methodology. Under the newer methodology used by the World Bank for the 2015 report, Jamaica moved up from 85 to 58, which is 27 spaces.