Shane Ingram, Contributor
INGRAM
BROKERS REPORT that institutional investors have slowly began to return to the local equities market, which has aided the process of recovery over the past few days. Market observers have long advised of the inevitability of this development in light of the negative real returns offered on money market instruments.
At the same time, investors should be happy to note that Carreras will pay $1 per share on October 14, 2005 to shareholders on record at September 30, 2005. Likewise, Jamaica Broilers will provide insight into its operations at its next AGM scheduled for October 1, 2005, at the Jamaica Conference Centre. So will Palace Amusement Co. on November 15, 2005, at 2:00 p.m.
Fuelled by 31 per cent growth in export volumes and price adjustments on domestic sales, Desnoes and Geddes (D&G) amassed $9.1 billion in sales for the year ended June 2005, or 16 per cent more than previous year. Export revenues expanded 58 per cent to $1.88 billion for period, which underscored the benefits derived from the increased marketing investment behind the Red Stripe brand in the global marketplace. Domestic revenues of $7.26 billion represented 79 per cent of the group's total revenue but only nine per cent growth over the prior. This growth in sales was, however, accompanied by a 21 per cent upsurge in production costs attributable to the higher production volumes and costs associated with electricity, fuel, salaries and wages, and insurance. Nonetheless, D&G enjoyed greater success in controlling overheads as growth in general, selling, and administrative (GSA) expense was capped at eight per cent, which allowed operating profit to move from $1.5 billion to $1.7 billion.
The increased core profits were complemented by $57.7 million in net interest income and $406 million realised from the disposal of land to Pepsi Cola Jamaica. These amounts boosted net profits to $2.35 billion, or 52 per cent above the outturn at the same interval last year. Note, however, that profits from continuous operations increased only 27 per cent as the land disposal was one-off in nature.
D&G will look to bolster future sales by securing its 90 per cent share of the domestic beer market while sustaining the strong growth momentum in exports. To this end, the beer giant will attempt to better tap into the local female consumer segment by changing the appearance and perceptual attributes of its major brands.
The addition of its new beer and traditional marketing activities should also provide support for domestic sales. Simultaneously, plans to aggressively expand the Red Stripe brand in 10 new European countries by 2006 together with increased marketing investments in U.S.A., Australia, Switzerland and Sweden should sustain growth in exports. The group will also look to extract greater operating efficiency through the new keg filling and washing plant, a new system for cleaning the beer storage vessels and pipe work, and the new yeast propagation and storage system. Although these initiatives predict increasing profitability over coming quarters, profits could be suppressed by cost pressures and/or the government's scheduled removal of the tax on imported brewed products by 2005.
RECOMMENDATIONS
The Winner's Edge recommends that investors add CRTS, RJR, LOJ, KW, Seprod, Gleaner, D&G, PJAM, and Goodyear to their investment portfolios. CWJA and Carreras are also good long-term option. Please contact DB&G's Stockbrokerage department at 1-888-CALL DBG for further information on these and other stocks or visit www.mydbg.com for detailed analyses.
Disclaimer: All information contained in this article has been obtained from sources that DB&G believes to be accurate and reliable. All opinions and estimates constitute the Author's judgement as of the date of the article. No warranty as to the accuracy, timeliness or completeness of this article and as to the opinions based thereon is given or made by DB&G. DB&G and/or its employees or directors and/or any associated person may have an interest in, or interest in the acquisition or disposal of, the securities or class of securities mentioned herein. Call 1-888- CALL DBG if in doubt about the content of this article. Decisions based on information contained in this article are your sole responsibility.
