Jamaica Producers Looks Towards Mergers in 2021

With the novel coronavirus pandemic impacting different facets of Jamaica Producers Limited’s (JP) food and drink plus logistics and infrastructure business, the company has decided to expand its business lines with several potential mergers and acquisitions from the direct $1.9-billion sale of SAJE Logistics Infrastructure Limited.

Despite more people staying at home and consuming more food, based on various company results, JP’s fortunes have been less than favourable as its diverse snack and drink division has been affected by the pandemic and torrential rains at the end of last year.

This became apparent in the company’s third quarter results where a 5 per cent rise in segment revenue to $3.3 billion was not enough to offset the sharp decline in operating profit from $207 million to $5.7 million.

Jeffrey Hall, chief executive officer (CEO) of JP, attributed the impact seen in the results to a decline in consumption moments from the closure of schools and work, where sales for its snack business happens in person and on the road.

Even with the decline in tourism and supply chain disruption affecting Tortuga International Holdings and JP Group International Limited, Hall adamantly stated that the businesses were still solid from core operations.

“JP runs a diverse food business which is multinational and also has seasonality in it. Aspects of the food business have been affected by COVID-19. None of the impact is structural or permanent. We’re fortunate that all of our food and drink businesses continue to be able to survive on their own balance sheet and cash generation. We have not used the proceeds of sale for the food and drink business of the group. We do believe that COVID-19 will present very attractive investment opportunities in the first quarter of next year,” Hall said.

JP’s third quarter revenue moved up by 2 per cent to $5.3 billion with net profit attributable to shareholders (NPAS) up by more than 393 per cent to $1.6 billion mainly due to the $1.8 billion gain on disposal of SAJE. Revenue for the nine months declined by 4 per cent to $14.8 billion, but NPAS remained 106 per cent higher at $2 billion.

JP’s logistics and infrastructure were relatively more resilient during the period with a 3 per cent decline in revenue to $2.1 billion and 12 per cent decline in operating profit to $755.6 million.

Subsidiary Kingston Wharves (KW), which is chaired by Hall, saw growth in its logistic services but a drop in earnings for its terminal operations.

“There has been an adverse impact due to COVID. We saw some improvement in Q3 relative to Q2, but there are still some deferred capital investments delayed until next year,” Hall said.

Total assets for JP grew by 8 per cent to $41.5 billion with equity attributable to shareholders climbing by a substantial 17 per cent to $16.2 billion. Total liabilities declined over the competitive period by 6 per cent to $10.4 billion. JP paid a large $224.4 million new year dividend earlier this month and added Maya Johnston to the company as chief commercial officer during the year.

Even though 2021 isn’t guaranteed to be a significant improvement over 2020, Hall is confident that JP will be able to capitalise on the buying opportunities presented thanks to the pandemic.

“We expect operations to continue to be impacted due to COVID-19 for the first half of 2021. We believe that the business is resilient and that we’ll be able to take advantage of acquisition opportunities in the time period. We have plans for 2021 to do capital investments and expansion. We’re looking at acquisitions in both segments.

“We believe none of that structurally affected the business. “What we’ve done is that we’ve put ourselves in a position to be able to fund acquisitions in the first half of 2021. If you’re going to watch JP over time, it’s really important you look at how we grow shareholders equity.”

Jamaica Observer at https://bit.ly/2MvZATQ