Lighting distributor FosRich to become a manufacturer
Published:Thursday | November 1, 2018 | 12:00 AM
FosRich Company Limited, which trades in lighting and energy products, will be setting up a production base to grow its slice of a market it estimates to be worth at least $20 billion.
The company will also be issuing a corporate bond for funds to finance inventory for its new industrial division. The size of the bond remains undisclosed, but Managing Director Cecil Foster expects the bond placement to close in November.
The debt raise should also allow the company to go after sections of the market it found difficult to enter.
"We are going to use a very unique way of financing our expansion," said Foster as keynote speaker at the monthly Mayberry Investor Forum on Wednesday.
"We have engaged with our financial partner and it is being executed, and within the next two weeks, we will have the funds to do that expansion that we spoke about," he said.
The company continues to beat average market growth rates with profit up 153 per cent at $10.4 million for the September third quarter, compared to $4.1 million a year earlier. Revenue grew to $353 million, compared to $232 million on year earlier.
The company aims to enter manufacturing as of next year, but did not say what product it would be making.
"We are going to be engaged in local manufacturing of a certain line of product that is used every day in Jamaica," said Foster.
"We lose 30 to 35 per cent from not manufacturing it here, so that alone puts us in a spot to approach the market. The market is $20 billion to $30 billion and all we want to do within the first year and a half, is get three per cent of the market. I cannot tell you what it is now, but we eventually want to export to the Caribbean," he said.
As to the company's plans to go heavier into the sale of industrial cables and wall and floor panelling, Foster said the industrial market is led by a few large established players who service large projects led by Chinese, Spanish and local developers.
Although the competition is fierce, he noted, FosRich was bullish on its capacity to carve out a niche in the market segment for itself.
"The growth in FosRich this year is not because of any great new business; it is because we have been providing the regular goods that people are asking for, and even now we are not fulfilling the demand. So we know we can do much more," he said.
"The demand is there and we just need the resources to make it better," added Foster about plans for increased financing to buy inventory. "When we get into the industrial business with cables and the panels, those numbers are going to make us really happy at the end of next year."
Currently, FosRich makes most of its revenues from its electrical division at 64 per cent; followed by the energy division at 23 per cent, and industrial sales accounting for the remainder.
The manufacturing operation is part of FosRich's three-year growth plan.
"Where we see ourselves in two or three years? Now, the industrial division accounts for between one and four per cent of sales; we really want to see that number taking up 30 to 40 per cent of the revenues in the medium term," he told the forum.
FosRich's turnover currently tops $1 billion annually, and so far this year, its nine-month revenue is up 19 per cent to $945 million. But Foster wants to do better.
"We feel if we strengthen the core business at FosRich, then we can do numbers that don't look like baby numbers," he said.
"The market in Jamaica now has never been better. Within the construction sector and the demand for energy, there are amazing things taking place. We are positioning ourselves to be that preferred creditable person in the market."