Salada grows profit despite revenue slide
Salada Foods Jamaica Limited suffered a more than one-fifth fall in revenue in the December quarter but still came out ahead in profit.
Earnings rose 142 per cent to $13 million at the bottom line, which the coffee processing company is attributing to cheaper inputs during the period and foreign exchange gains. Revenue fell 22 per cent in the quarter to $288 million.
General Manager Dianna Blake-Bennett said Salada’s bottom line fared better than expected because the company bought less coffee beans in 2020 than it did in 2019, and that its cost of sales were affected by expensive beans in the 2019 period.
“The performance is better than the prior year as the [December 2019] quarter’s results reflected the company’s inability to import beans as the regulator denied permits to import, and so expensive Jamaica Blue Mountain Beans have to be used in the manufacture of some of our products. This adversely impacted cost of sales in the period,” said Blake-Bennett.
“This is not the case this quarter,” she added.
Additionally: “Net profit improvements are directly related to foreign exchange gains attributed to the devaluation of the Jamaican dollar. The comparative period in the prior year saw the Jamaican dollar appreciate in value,” Blake-Bennett said.
In late 2018, Salada made substantial purchases in local green beans. Over time up to mid-2019, the company purchased 25,000 boxes of coffee cherries from local Blue Mountain coffee farmers. Blake-Bennett says the company is still working through that inventory; that the stock still on hand would be utilised for a product soon to hit the market.
Salada Foods, producer of the Jamaica Mountain Peak instant coffee brand, has long used 10 per cent local coffee beans, blended with imported beans, to produce its range of soluble coffee products. But under new quota rules, the coffee process is going to have to triple the volumes of local beans it normally uses.
The Jamaica Commodities Regulatory Authority requires at least 30 per cent local inputs in coffee products, and having given Salada a waiver in the past, insisted last September that it comply. Salada – asserting that the new requirements would increase its input costs and change the taste profile of its products, potentially affecting its market – protested the directive through the courts and lost. Blake-Bennett says the company is now compliant with the rule as of January 2021.
Salada is looking to the export market for improved revenue, she added, to offset the increased costs.
“Exports did well last financial year, and that segment is showing a similar trajectory in the region of 20 per cent of total sales,” Blake Bennett said.
The coffee company’s products are distributed by its subsidiary, Mountain Peak Foods Processors Limited. Mountain Peak, in turn, sells the products manufactured by Salada through domestic distribution partner Lasco Distributors Limited.