Fish sticks made by Jamaica Broilers. - File

Ashford W. Meikle, Business Reporter

Jamaica Broilers Group expects a turnaround this year from its unprofitable fish segment, which has operated at a loss for most of the division's 25 years in business.

"We anticipate to be in profit situation with agriculture - it's going to be a relatively small level of profit," said group vice-president for finance and planning Ian Parsard, "about $10 to $20 million or so projected for the 2007-2008 financial year we are in now."

The group's fish operations, which grossed about $515 million for the financial year ending April 28, is responsible for just over four per cent of the $11.4 billion that Jamaica Broilers earned last year.

The segment chalked up losses of $23 million, but this out-turn represented a strong correction on the $100 million of losses sustained in 2006, which Broilers attributes to strategic changes in marketing and production.

"This operation is no longer a drain on our cash resources as the loss incurred of $23 million is equivalent to depreciation in the year," said a statement from the company.

Jamaica Broilers, after investing hundreds of millions in infrastructure several years ago, identified its fish operations as a major growth engine and decided to make a strategic push into the fast food industry, supplying breaded and battered fish fillet products.

The plans also included exports to Caribbean territories and Latin America.

But, with the inability of local quick service restaurants to sustain the investments as well as the unrealised business opportunities in targeted regional export markets because consumers did not embrace the product, the company had to backpedal on those ambitious plans.

"We have changed our strategy in a significant way," Parsard told the Financial Gleaner.

"Our focus traditionally was on the fast food segment [but] we realised that the challenges there would be so difficult to overcome and so we have changed our strategy and move back into larger freshfillet exports which are targeted to the U.S. and primarily the United Kingdom," said Parsard.

Now, in addition to supplying its traditional markets in the United Kingdom, Broilers' products are on the shelves of about 200 of the over 2,000 Tesco supermarkets in that country.

In addition, the company is growing its local business with its live sale market from its outlets in St. Elizabeth and Clarendon.

Parsard says that Broilers has no intention of scuttling its fish farming.

"It's something we have looked on very carefully and agonized in a significant way in terms of a decision," he said.

"We have been an agricultural company for the past 50 years and our base is in Jamaica. The fish operation is sunk in the ground; it's not causing us any cash so the operation has been able to improve."

For its 2006 financial year the Jamaica Broilers' revenue rose by 15 per cent over the previous year. But, gross profits only grew 11 per cent to $2.7 billion due to a 17 per cent increase in its cost of sales.

"During this particular year we had significant increases in grain prices which pretty much hit a ten year high. I believe the level at which it [reached] was US$4 per bushel and we were buying grain on the level of US$2.30 to US$2.50," noted Parsard.

There was also an 18 per cent increase in distribution costs, dragging down operating profit, which declined by three per cent. The company's net profit declined by 17 per cent, to $536 million, but the company says that last year's figures were positively affected by the $120 million negative goodwill on acquisition.

"Gross profits increased in nominal terms by ten per cent, to $2.7 billion and the operating profit after tax amounted to $536 million compared o $525 million last year."

ashford.meikle@gleanerjm.com