Susan Gordon, Business Reporter

Doreen Frankson, president of Jamaica Manufacturers Association speaks at the launch of Buy Jamaica Essay Competition in this October 31 file photo, at offices of the JMA, Kingston. - Rudolph Brown/Chief Photographer

Void of the natural disasters responsible for slowing down manu-facturing a year ago, the sector's contribution to the economy still suffered a 2.5 per cent decline in 2006 largely linked to a disaster of another kind - poor quality cement on the market and a consequent shortage of the commodity.

But the dearth of cement never left manufacturers behind in its dust, at least not entirely. Some businesses churned out new products, while others expanded their operations. Others announced new investments.

Corrpak opened a new corrugated plant to produce 60,000 boxes per day, a US$42 million investment; the association of egg farmers and Caribbean Prodcuers built a $30 million plant to process liquefied eggs locally, a first for Jamaica; Lascelles' new Kingston 62 beer hit the market as did KRB Lea Jamaica Rums Limited's Trelawny Rum line, Jamaica Biscuit Company's Cinnamon Cracker; Continental Baking's new King Cracker and Jamaica Broilers' chicken ham.

Ethanol plant

Jamaica Broilers also announced a $1.1 billion investment to build an ethanol plant in St. Catherine.

Furniture makers managed to tag new business as the tourism sector blossomed, landing contracts with the Spanish-owned Bahia Principe hotel in St. Ann. Boss Furniture was contracted to supply 799 pieces of bedding items valued at US$121,263, while Therapedic Limited supplied mattresses and covers, foam and pillows valued at US$300,000, the Jamaica Manufacturers Association (JMA) reported.

But amid the signs of vibrancy, there were some knocks to the sector.

Bermudez Biscuits, it emerged in June, kissed Jamaica goodbye, ending production of the Kiss brand of pastries here.

Claude Clarke's Highgate Foods, the sole maker of chocolates, went into receivership. Desmond Blades of Mussons Jamaica would later floor receiver Ken Tomlinson with the claim that he had acquired the Highgate brand two years before. The brand was considered the company's best leverage for investor interest, and therefore Highgate Foods' most valued asset.

Also in the last quarter of 2006, conglomerate GraceKennedy Limited announced a new corporate structure which it said should save the company some $300 million per annum. The new structure collapsed a number of business units into two divisions - GK Foods and GK Investments. The changes were prompted by a slowdown in GraceKennedy's profits, linked to poor performance of some of its business segments, particularly those linked to merchandising.

SOME BUSINESSES GREW

Selected manufacturers, however, said in spite of several challenges, that their individual businesses grew, notwithstanding the heavy cost of commercial capital.

The lobby for lower lending rates to businesses from commercial banks continued as the resilient Jamaica Manufacturers Association rejected the Fair Trading Commission's report that there was no evidence of collusion among local commercial banks in setting interest rates.

Although loan rates to businesses slipped from 22 per cent at the end of 2005 to 21.84 per cent up to August this year, JMA president Doreen Frankson felt this still was not low enough.

The JMA blamed much of the contraction in maufacturing Gross Domestic Product (GDP) on the fall out in the food, tobacco and chemical sub-sectors, saying that Carreras' decision to relocate its tobacco manufacturing plant to Trinidad and Tobago in December 2005 impacted negatively on the industry.

But the cement crisis may have been the single most constraining force on the sectors' performance this year.

"2006 started out very well until the cement crisis came and we have not recovered from that," said Frankson at a JMA luncheon this month.

PRODUCERS HIT

The cement crisis resulted from the release of 500 tonnes of faulty cement into the market by monopoly producer Caribbean Cement Company, never actually slowed the production of manu-facturers. Some were hit in their retail business, but said they were able to bounce back later in the year.

"We had a fairly successful year with the exception of delays caused by the cement crisis which affected our sales, both directly and indirectly," said Melissa McHargh, general manager, EdgeChem Jamaica Limited.

As construction sites closed, the demand for building material, paints and other complements to the sector waned.

Tens of thousands of jobs were reported to have been lost in a sector where employment topped 100,000 workers.

Inevitably, the lost earnings meant fewer persons were spending on their homes, cars and other personal possessions.

Bruce Bicknell, managing director of Tank-Weld Metals said too that his company had a good year despite the cement crisis.

"We were able to recoup," he said, but added that major construction projects had again tapered off.

LESS RISKY YEAR

Bicknell noted that the dip in November to December was seasonal, and that the construction business is expected to pick up again in January-February as it normally does.

"This year was better than last year because we had more major projects," said the Tank-Weld boss.

"We grew by about 10 per cent."

Bicknell also felt 2006 emerged as a less risky year for running business based on the relative stability of the exchange rate which traded at around an average rate of $65 against the U.S. dollar for most of the year, dipping to $67 in December .

The food and beverages sector hit a slump during the year and was chiefly responsible for the fall in manufacturing GDP.

"Overall it has been a pretty flat year," attested Ryan Mack of Grace Foods & Services. He said the juice market was very competitive seeing some products such as Tropical Rhythm doing fairly well while others had mixed performance.

FOOD SLUMPS, JAMAICA BRANDED

The cement crisis also fed the slump in food.

"During that period, we did see downturn in pockets of the wholesale trade," Mack told the Financial Gleaner. "There was a marked impact."

Beverage giant Desnoes and Geddes/Red Stripe did enjoy a good year although its net profit after tax dipped to $2,212 million (2005: $2,353 million).

Local volume sales fell below expectations, according to the directors report, but the company had an 8.0 per cent increase in business overall, built on export sales, despite a sluggish start.

During the year, the name of Jamaica became a sought after brand. Clothing, accessories, shoes, bags and jewellery were splashed across the stores only to be snatched up by mostly young buyers as the Brand Jamaica and Buy Jamaican campaigns resonated among shoppers.

The JMA reported that a market survey now indicates that 79 per cent of Jamaicans are more inclined to buy local products over foreign imports.

CHALLENGES

In May, manufacturers began to experience delays at the ports in receiving their raw and packaging materials. In order to be proactive and prevent a repeat of the effects of the congestion in 2004, the JMA and the Port Authority collaborated to facilitate manufacturers.

Information related to containers and shipment was collected from members and submitted to the Port Authority so that priority could be given to those ships transporting raw materials for manufacturers.

During this period, congestion surcharge and terminal handling fees were implemented by the West India Trans Atlantic Steam Ship Lines (WITASS). These charges fed into an increased cost of production, said the JMA, which would negatively impact the competitiveness of the manu-facturing sector.

The association launched and continues to lobby for the removal of the 2.0 per cent customs user fee on imported inputs for production.

susan.gordon@gleanerjm.com