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Blue Power to spend $30m on upgrades for new soaps

Published:Wednesday | June 22, 2016 | 12:00 AMSteven Jackson
Dr Dhiru Tanna, chairman of Blue Power Group.

Blue Power Group, which makes soaps and trades lumber, will spend $30 million to upgrade its production facilities and add warehouse space to introduce a second line of soaps.

The company wants to keep pace with increased soap demand.

Blue Power, chaired by Dhiru Tanna, made $76 million in net profit for the year ending April 2016 on $1.2 billion in revenues, or about 9.0 per cent higher profit after tax. Revenue grew 15 per cent.

Blue Power will activate a second production line for its bathing soap division to meet the increased demand for carbolic and other speciality soaps.

"In order to satisfy customer demand for wrapped products, we will need more capacity and, to this end, we have ordered more equipment," Tanna said in statements accompanying the financials.

This will require a reorganisation of the company's wrapping and production equipment, now under way.

"At the same time, the need to prepare for increased demand will require additional storage capacity for raw materials, which we will meet by leasing the lot next to our factory and creating the necessary warehouse facility. The estimated capital expenditure for these exercises is J$30 million," Tanna said.

In previous years, the company sought to grow profits via efficiency measures, as revenues remained flat due to what management described as competition from cheap soap imports. Another company challenge related to the difficulty of gaining retail space in order to diversify its main downtown street sales.

"We are beginning to gain more shelf space in retail outlets in Jamaica and have devoted additional resources to make further inroads," the chairman said.

Still, the company seems pleased with its export performance.

"It is heartening to note that our total exports, especially to Guyana, have increased by more than 50 per cent from $36 million in the previous year to $54 million in 2016. Thus far, our exports have consisted mainly of blue laundry soap, but in the last quarter, we saw an uptake of our carbolic soap, which is a positive development as it suggests that our bathing soaps are gaining greater acceptance abroad," Tanna said.

This year, overall sales are up in both major divisions, with the lumber depot division showing an increase of 17 per cent and the Blue Power division improving by 9.0 per cent.

Profit before tax is actually up 21 per cent from $71 million to $86 million, but rose nine per cent at the bottom line after taxes. The junior market company is back paying corporate income tax, after five years of full exemption, but is still allowed a 50 per cent break for another five years.