Wisynco mulls $5b capital investment
Published:Wednesday | February 9, 2022 | 12:08 AM
Beverage maker and distributor Wisynco Group Limited will invest upwards of $5 billion on capital projects to put its cash to work, says CEO Andrew Mahfood.
It marks a shift in the company’s stance from one of safeguarding cash in case of pandemic fallouts, to spending on growth projects as the economy continues to recover from the health crisis.
“The beverage machine industry is capital-intensive and the projects that we are looking at right now, they fly past US$20 million to US$30 million, or about $5 billion. Yes, we will use some of our reserves as equity in those projects, and competitive bank financing,” Mahfood said in response to questions at the company’s annual general meeting held virtually on Tuesday.
Wisynco, a top-five maker and distributor of beverages and snacks across Jamaica, grew its cash holdings to $8.9 billion at December 2021 from $6.8 billion a year earlier. At the same time, the company has seen a reduction in its debt levels.
Since the company went public and listed on the stock market in 2017, its debt-to-equity ratio has fallen by more than a half, going from 30 per cent then to 14.3 per cent now. Usually, companies like to keep that ratio below 50 per cent, in order to avoid a debt trap, but it varies from sector to sector.
“There is a lot of room for future leverage for expansion which we are actively considering,” said CEO Mahfood.
Wisynco Group Chairman William Mahfood told shareholders that since the onset of the pandemic in March 2020, the company had scaled back its investment plans, prioritising liquidity instead by growing its cash pile.
“We went through a number of quarters with the uncertainty during the pandemic. And we’ve now seen the worst of it – hopefully,” said William, who added that the company now views the future as optimistic.
It is betting on that outlook, having paid out $750 million in dividends at half-year ending December, or twice year-earlier levels, and will make another $750 million distribution on March 1, amid mulling plans for investments.
“We will continue to look for opportunities with this cash, to deploy for inorganic growth through acquisitions. We have in our sights a number of opportunities and, hopefully, they will come to fruition,” the chairman said.
Wisynco’s capital expansion programme aims to increase its production capacity and improve cost efficiencies to meet rising demand.
The increased prospects for business stem from recovering hotel arrivals, rising demand for restaurant services, and the reopening of schools – all lucrative markets for food and drink companies.
In addition to the production of its own beverage brands, St Catherine-based Wisynco Group bottles Coca-Cola products, and distributes a range of drink, food and paper products. Its total annual sales currently amount to $32 billion.
For the second quarter ending December, the company earned a profit of $1.16 billion on sales of $9.5 billion. That’s up $688 million in profit and $8 billion in sales in the comparative 2020 period. Over six months, July-December, sales climbed to nearly $19 billion, while profit grew to $2.13 billion.
REDUCED COSTS
To better serve western Jamaica, and the tourism market along the north coast, Wisynco is developing a second distribution hub that’s meant to reduce delivery times to clients in those areas. The Northwestern Distribution Centre under construction in Trelawny is scheduled for commissioning in March.
“[Expect] increased volumes and improvement in customer service. This will drive reductions in overall costs, but it’s more in terms of service,” William said of the reason for the investment.
Wisynco also plans to invest in new software and processes to improve warehouse and inventory management. Its WATA brand of plain and flavoured waters will be outfitted with new packaging; while for brands it is contracted to represent, new offerings from Tru-Juice juices, St Mary’s snacks, and sugar estate Worthy Park will be added to its sales portfolio.