Geest acquisition already paying off for JP

August 20, 2021

Jamaica Producers Group, JP, is already generating profit from its recent acquisition, Geest Line Limited, amid rising demand for shipping services.

“Everyone is making money on shipping now,” said JP Managing Director Jeffrey Hall, adding in an interview with the Financial Gleaner that shipping charges have spiked since the pandemic due to logistics issues, including container shortages.

What’s more, during the second quarter, JP’s shipping unit, which includes Geest and freight forward businesses, registered a spike in overall demand for shipping relative to the 2020 quarter, which was “severely affected” by COVID-19-related lockdowns.

Geest operates mainly between the United Kingdom and the Eastern Caribbean. JP, in the second quarter, completed the acquisition of a 50 per cent interest in Geest, which is based in the UK and has been operational for 65 years. The remaining 50 per cent continues to be held by Sealines Holding NV, which trades as Seatrade, a provider of reefer vessel shipping services headquartered in Curaçao.

JP, a food and logistics conglomerate, reported $48 million in ‘share of profit in associates and joint ventures’, for April-July 3, which Hall acknowledged related to Geest. It was a relatively small contribution to JP group profit for the period, which doubled from $379 million to $774 million. But Geest is reflective of the growth companies that JP is hunting to add muscle to the group, which has $9 billion in cash and is looking for new deals.

Hall expects the structure of shipping to change in the next five years. JP wants to acquire other businesses like Geest and integrate them into its network of logistics enterprises serving the Caribbean.

“The Caribbean is very trade-dependent, and JP wants to find logistics opportunities to move increased goods into the Caribbean,” he said.

Hall said the Geest profit as a proportion of the cost of acquisition already puts it well above the expected rate of return for typical investments in the group. He declined to comment on the expected payback period for the investment, citing concerns over potentially breaching the rules for forward-looking statements. He also declined to state the acquisition price for Geest, citing confidentiality clauses in the agreement.

“We are very pleased with the acquisition, and we believe we are adding value to the business. I believe this will deliver a return on investment well above our minimum target of 15 per cent for our investments in general,” Hall said.

JP’s accounts show the value on its assets held in associates and joint ventures totalling $182 million, compared to nil in December 2020. This would imply that Geest’s assets are included in that figure, but UK company records show Geest holding £17 million in net assets, or about $3 billion in Jamaican currency.

The outlook for JP remains positive, but risks include inflation, supply chain shocks and economic uncertainty related to the management of the COVID-19 pandemic, the company said.

“We have seriously considered the current trading conditions and have positively decided to maintain an aggressive investment programme,” JP said in the preface to the financial results.

“Our strategy is to build on our core business capabilities in food and drink, and logistics and infrastructure with selective capital investment projects and acquisitions,” JP said.

Jamaica Gleaner at https://bit.ly/3gN5iNz