Mon | Apr 6, 2020

CPJ to face bondholders again

Published:Thursday | February 27, 2020 | 2:27 PMNeville Graham - Business Reporter
Mark Hart, chairman and interim CEO of Caribbean Producers Jamaica.
Mark Hart, chairman and interim CEO of Caribbean Producers Jamaica.

Caribbean Producers Jamaica will report back to bondholders Friday on progress made in bringing its financial ratios back into compliance with debt covenants, in a follow up to a meeting held six months ago.

CPJ Chairman and interim CEO Mark Hart said ahead of the meeting that the company is now doing better and hitting its ratios, having recovered from losses linked to the write off of a new IT system that failed at implementation.

However, the company foresees future problems with a new accounting standard, IFRS 16 – which deals with how leased assets are accounted for and took effect on July 1, 2019. CPJ will be asking for an adjustment to the bond’s trust deed to ward off future breaches of the covenants. The $500m bond matures in 2023.

“We won’t be asking for anything special except that they look at the new IFRS requirements. The truth is that we could meet the covenants with IFRS 16 right now, but going forward we’d want to maintain the same rules lest something new comes along that change the way we measure things,” Hart said.

In just released second quarter results, CPJ reported net profit of US$836,023 at December 2019, up from US$164,722 in the same period in 2018.

For the six months ending December 2018 CPJ lost US$1.13 million. But for the current period it made a profit of US518,627.

This quarter’s profit was on the back of a 10.7 per cent increase in revenues, which stood at US$32.38 million. CPJ mainly sells to the hospitality sector.

“We’ve had good results in several of the categories including wines and spirits, fish and other seafood; and dairy had a good showing,” the chairman said. “The opening of the H10 hotel at Coral Springs did a lot for us. While it was not responsible for the full lift, we got some good business from them in a competitive environment,” he told the Financial Gleaner.

At December 2019, the company’s current ratio, that is its current assets to current liabilities, rose to 2.12 times, compared to 1.86 times the year before. Its earnings before interest depreciation, taxes and amortisation, EBITDA, improved by 98 per cent, from US$1.64 million to US$3.32 million. The trust deed for the bond covers both, said Hart.

The failed IT system cost CPJ around US$1 million. Hart says the company is spending US$430,000 on the implementation of a new system, and has taken on a new chief information officer, Alejandro Sanchez, who formerly worked with PriceSmart at the regional level.

David Lowe, who resigned as CEO at the end of January to go back to the financial sector, is acting as management consultant to CPJ until a replacement is found for him.

As for the pending meeting with bondholders, which follows from one held last August 9, Hart foresees no hiccups.

“We just had to satisfy those typical ratios, which we’re meeting now,” he said.

Bond trustee Scotia Investments Jamaica declined to comment.