Robert Levy, chief executive officer of Jamaica Broilers, expects 'big things' for the company this year. -File photos Jamaica Broilers Group has posted reduced profits of $512 million, 20 per cent below last year's performance, helped down by a big tax bill of just under $200 million and higher operational expenses over the past year.
Much of the depressed activity was among the group's subsidiary operations, whoseshare of profits was only $79 million, down from $333 million in the 2006 period.
Broilers' operating profit was also depressed to $785 million from $816 million a year ago due to bigger selling and administration expenses, which grew by $81 million.
The group's top performance was in revenue growth of $1.55 billion or 16 per cent to $11.5 billion, and gross profit which climbed by $154 million to $2.65 billion.
In its outlook for this year 2007/08, the company expects little to change in its core operations, but anticipates heavy growth from its expanded energy segment.
"On our core poultry and feed businesses, we expect a stable year with results similar to the 2006/2007 year just completed," said Financial Controller Ian Parsard.
"As for ethanol, the new addition to the family, we expect we will have significant improvement on our top line."
Parsard said ethanol is projected to grow revenues by 75 per cent, which, if achieved, would push group revenues to more than $20 billion by the end of April 2008.
Its likely the size of the figures that prompted an enthusiastic reaction from chief executive officer Robert Levy, whose immediate response was: "Big things", when reached for comment on what was in store the for his company.
Broilers has established a subsidiary operation for its ethanol business, called JB Ethanol Limited, which is overseen by senior vice president Christopher Levy.
In its first year of operation, the plant will output 40 million gallons of dehydrated ethanol, said Parsard, which amounts to 66 per cent of its 60 million gallon capacity.
Efficiency margins
For its financial year just ended, the group's efficiency margins were all down - for example, its cost of goods sold rose to 76.5 cents for every dollar of revenue gained, up from 74.7 cents in the 2006 period, resulting in a near two point decline in gross profit margin to 23.5 per cent.
Its operating profit margin also fell from 8.2 per cent to 6.8 per cent in the current period ending April 2007, while its net profit margin was down from 6.5 per cent a year ago to 4.5 per cent.
As a result, shareholder returns as measured by earnings per share were down from 54 cents to 43 cents in the current period.
Broilers dominant business segment, poultry, posted almost flat results on its operations, growing by only $10 million to $854 million, but feed and farm supplies were up by 16 per cent to $463 million.
The problematic fish operation, while losing $23.4 million, actually posted strong improvement in the year under review, having haemorrhaged $100 million in 2006.
Healthier balance sheet
Its balance sheet was healthier, with net assets growing by 10 per cent to $4.8 billion.
But a near $700 million increase in loan servicing costs depressed the company's net working capital position from $1.55 billion a ago to $840.8 million at the end of April.
Return on assets was down to 41.7 per cent from 43.4 per cent in 2006.
Its cash flows were also in negative territory, with borrowings and bank overdraft charges eclipsing by $231 million the group's available cash resources and funds available under its short term investments, recorded at $665 million.
Heavy spending
Broilers spending has been heavy over the period, reaching above $958 million on its ethanol plant alone, which was commissioned last month at Port Esquivel, St Catherine.
Parsard was unwilling to make a call on the expected impact on net profits, saying start up and logistics costs were difficult to predict. Raw materials and freighting were likely to be the highest price points, said the financial controller
"We anticipate growth in net profit but not as large as our topline growth, because of startup issues and start up costs," he told the Financial Gleaner.
On the world market, ethanol prices are now running just below US$1.90, but the commodity is heavily traded and its price volatile.
Given those conditions, Broilers would be in a better position at half year to give a reading on how the ethanol segment will likely perform, Parsard noted.
Jamaica Broilers Group
Year Ending April 2008
Revenues $11.5 billion
Operating profit $785 million
Net Profit $512 million
Net Assets $4.8 billion
EPS 42.7 cents
Share Price $4.60
Book Value/Share $3.52
