Blue Emerald withdraws from SEZ arrangement
Blue Emerald Limited, a company affiliated with energy products trader FosRich, has terminated its arrangement to operate as a special economic zone or SEZ, due to “the narrow interpretation of customs duties” applied to SEZ activities. Cecil...
Blue Emerald Limited, a company affiliated with energy products trader FosRich, has terminated its arrangement to operate as a special economic zone or SEZ, due to “the narrow interpretation of customs duties” applied to SEZ activities.
Cecil Foster, managing director of FosRich Company Limited, said although the SEZ arrangement comes with special duty concessions, it became clear that the cost of manufacturing within the Blue Emerald SEZ was significantly higher than the cost of production outside of the zone.
“Blue Emerald Limited remains as a company operating under the Factories Act. It will continue to manufacture exclusively for FosRich,” Foster told the Financial Gleaner.
He noted that FosRich was already operating under the Factories Act at its Marverly Avenue facility, which was proving more beneficial.
“We rescinded and went back to the Factories Act because we couldn’t operate like that under the SEZ anymore,” he said.
Blue Emerald is an associate company of FosRich, but they also have shareholders in common.
FosRich has been pumping funds into the nascent business, which FosRich said in market disclosures amounted to $226 million of investments last year. It also made purchases amounting to $23 million from the associate.
FosRich operates a twin-section plant at Hayes, which is the production centre for its large-diameter PVC pipes, sewer pipes, and a full range of PVC fittings. The other section is dedicated to FosRich’s electrical transformer repair effort, where Blue Emerald is contracted to repair up to 1,400 transformers for the Jamaica Public Service (JPS) Company.
Foster says Blue Emerald will soon expand its operations to include the production of the transformer coils that are used in the repairs. Previously, the company had to import these coils that are the heart of the proper functioning of a transformer from Canada.
“We have the machine and we have the technology and our team went up to our partners CamTron in Canada to be trained. They should start that part of the operation by April,” Foster said.
He says under the present arrangement with JPS, old transformers are dismantled and rebuilt to specifications. Since January, Blue Emerald has managed to deliver about 400 refurbished transformers with a 10-year warranty, which puts the units on par with new ones, at 60 per cent of the cost, he said.
Foster says none of Blue Emerald’s revenues are reflected in FosRich’s 2022 report, but that with the transformer repairs and pipe production expected to hit their full stride, that should change in 2023.
In the year just ended, FosRich generated total revenues of $3.37 billion, up 43 per cent from $2.35 billion in 2021.
“We sold 22 per cent and 25 per cent more on our two major lines, namely, copper wires and PVC pipes. So that boost in revenues came more from greater volumes rather than any of the minimal price increases that we had to pass on,” Foster said.
The higher turner drove up profit by 63 per cent, from $199 million to $325 million.
Much of the company’s fortune was due to robust activity in the construction sector, but Foster also said his company was able to forge more supply deals and with local hardware establishments and other bulk suppliers.
“We’ve just seen the start of bigger things for the likes of PVC pipes. We are projecting about 40 to 50 per cent growth in that segment in the coming year,” he said.
Some of that is linked to emerging opportunities, whereby large suppliers are said to be in the process of exiting previous long-term arrangements with overseas firms, and looking to FosRich as an alternative.
FosRich is the only company in Jamaica to produce PVC pipes, entering the business in 2019, after a two-decade hiatus when the last manufacturer locked down operations.
However, FosRich’s primary business remains a trader of lighting, electrical and solar energy products, representing brands such as Huawei, Philips Lighting, Victron Energy, Siemens, Nexans and General Electric.