JamTeas prioritises internally funded projects, further delays Bell Road factory expansion

Jamaican Teas has pushed back the expansion of the Bell Road factory in Kingston, amid prioritisation of other projects that are being financed from its internal holdings.

Managing Director John Mahfood said the plans will not materialise before year-end 2022, as the company is self-financing all its projects, thus tying up resources.

The factory is to expand from 22,000 square feet to 34,000 square feet, under what was initially announced as a $150-million project that was scheduled for commissioning in September 2021.

“We have delayed the start of that project because we are self-financing the Belvedere project, which will end up costing about $500 million; so we’re focusing our resources on finishing that, building out that other (Montgomery Road) facility, before we proceed with the expansion,” Mahfood said.

Jamaican Teas is mainly a tea maker, but it has also branched out into other food manufacturing, operates as a real estate developer, and controls an investment company. It’s in the process of spinning off the manufacturing operations into a new company that’s also to be listed on the stock market.

Eighteen of the 25 units in the Belvedere residential real estate development are 80 per cent complete, according to Mahfood, while the units are expected to be sold off by the fourth quarter of 2022.

Meanwhile, Jamaican Teas is outfitting 10,000 square feet of space at the Montgomery Road facility for the production of soups and dry spices – buying itself time until the Bell Road expansion comes on stream.

Jamaican Teas barely grew revenue in 2021, with sales of $2.27 billion compared to $2.19 billion the previous year. But weighed down by production costs, its gross profit dipped from $584 million to $553 million.

The company is now focused on growing output, including in its core area of tea production, in order to overcome the pressures wrought by the pandemic.

The triple whammy of increased shipping costs, inflated raw material prices, and the shortage of shipping space causing stock-outs, conspired to increase total costs and hurt production, the manufacturer noted.

“The combination of those things created a significant increase in our cost of sales, while at the same time we did not increase our selling prices, as we were holding off on that at a time when Jamaican people were hurting,” he said.

Despite the top-line worries, the company executed a strong turnaround in earnings, from a loss of $70 million to profit of $586 million. That’s largely because a large $482-million fallout in its investment holdings was not replicated in 2021.

Jamaican Teas began passing through increases to consumers in January, but is expecting to report improvements to revenues even before that for the October-December 2021 quarter, the publication of which is pending.

The spin-off of the manufacturing arm is now looking like it could happen by around mid-year.

“We’re waiting for some legal matters to be finalised so that we can operate under the new name with new company arrangements. It’s looking more like May to summer for that matter to be cleared up,” Mahfood said.

neville.graham@gleanerjm.com