Camilo Thame, Business Reporter

Dr Marshall Hall and Charles Johnston, managing director and chairman, respectively, of Jamaica Producers Group, are seen here in an October 2005 picture. - file

Jamaica Producers' (JP) decision to accept Dole Food Company's buy-out offer for its banana ripening and fruit distribution business in the United Kingdom for $2.76 billion will allow the local company to expand its juice and smoothie business in the U.K., says chairman Charles Johnston.

JP notified the Jamaica Stock Exchange Monday that it would accept the US$41.9 million offer from its minority partner to buy its 65 per cent interest in JP Fruit Distributors Limited (JPFD), following a board meeting to consider the terms.

Johnston told Wednesday Business on Monday that the sale would give his firm"the opportunity to use funds for expansion in other markets, such as juices in the U.K.."

JP operates its subsidiary, The Serious Food Company, in the U.K. to produce and sell fresh juices - Sunjuice being the largest business unit in the division - and smoothies in the U.K.

Producers' fresh and processed foods division, which involves the distribution of fresh produce other than bananas, along with the manufacturing and distribution of juices, has recorded healthy quarterly profits.

Profit before tax increase five-fold, from $28 million during the three months to June 18, 2005 to $141 million during the comparative period this year.

Additionally, that division has become a mainstay in the group's operations, contributing almost 90 per cent ($640 million) of the pre-tax profit in 2004 and 53 per cent ($328 million) of profit before tax in 2005.

The fall-off last year was due to the impact of a "product-tampering incident affecting a single carton of product from one of our juice factories," according to the company's 2005 annual report, which lead to a decision to instate a limited product recall in April last year.

But it was the pressures of the new tariff regime for banana imports to the European Union (EU), which was implemented in January 2006 Ñ being felt by JP as well as Dole Ñ that ultimately tipped the board's decision to sell.

"The offer was fair and the price was good," said Johnston. "But distribution in the UK is getting increasingly difficult because of the new regime, while supermarkets are becoming increasingly demanding."

Under the new trading regime, volume restrictions on banana imports from Latin American were removed while a cap 775,000 tonnes was placed on the amount of bananas imported free of duty from African Caribbean and Pacific (ACP) countries. Over that amount, a duty of euro176 per tonne is applied.

Producers' banana division, which includes the banana ripening and distribution aspect of JPFD and JP's shipping operations, saw a decline in revenue, from $3.6 billion to $2.96 billion; and in pre-tax profit, from $151 million to $7 million, during the quarter.

Dole's fresh fruit revenues in the quarter ended June 17, 2006 increased to US$1 billion, or by two per cent over the comparative three months last year.

The increase in fresh fruit revenues was primarily due to higher banana volumes sold in Europe, from Latin America, alongside higher prices on fruits sold in North America.

However, Dole saw its fresh fruit earnings before interest and taxation (EBIT) decrease to US$52.5 million in the June quarter from US$95 million in the comparative period last year, primarily as a result of higher product costs that impacted worldwide banana operations and "higher costs in the European banana business related to the new tariff fees imposed by the EU in connection with the new import regime."

Dole had acquired the 35 per cent stake in the UK operations in 1994 through a joint venture agreement, which, at the time, gave the American fruit distributor access to 20 per cent of the UK banana market.

Last week, Producers' group company secretary, Kermitt McGann, said it was the terms of that agreement which required that the offer be made at this time.

JP in its statement to the local stock exchange on Monday said it will continue to operate its farms in Jamaica and in Central America, and "to build on its tradition and expertise in supplying quality fruit to the UK market."

Added Johnston: "JP is not getting out of the banana business in the near future. We plan to continue growing bananas locally which we will sell to Dole. That contract that will last up to the end of next year but these contracts tend to be made yearly."

camilo.thame@gleanerjm.com