Jamaica Livestock Association focused on balance sheet growth, plans rights issue
Published:Friday | October 29, 2010 | 12:00 AM
The Jamaica Livestock Association (JLA) continues to be hampered by inadequate working capital, posting a net loss of J$30 million at the end of its third quarter, even while increasing revenues.
Its outlook, however, is rosier than past performance, with expectations of a turnaround in 2011.
For the three months ending August, JLA recorded improved revenues of J$228 million, up 17.5 per cent from the J$194 million earned for the same period last year.
"The company's performance for Quarter Three continued to be adversely affected by lack of sufficient working capital, coupled with the effect of the Tivoli incident in May this year," said Henry Rainford, managing director of JLA.
During the Tivoli Gardens clash with security forces, Rainford said the company had to close its Marcus Garvey operation for a week, the incident also having affected delivery of supplies nationwide.
"Even though we have sold the feed plant, we still don't have enough working capital to buy the goods that people want; and the banks are very tight now," he said.
JLA, in August, had net cash flows of J$4.5 million.
The feed plant and wharf facilities were sold in March, resulting in a gain of J$428 million, enough to produce improved profit in the nine-month period, but without which the feed manufacturer would have slipped into a loss position.
Net profit rose J$55 million to J$332.4 million in the nine-month period.
"Steps are being taken to address the working capital shortfall and we expect to see a turnaround by the second quarter of 2011," said Rainford.
"The company is now in the process of taking a comprehensive look at all facets of its operations with a view to further streamlining and rationalisation of its com-mercial activities," said Rainford.
While the option of selling off more assets has not been ruled out, Rainford said JLA was also working closely with its bankers on its long-term debt.
"The company is constantly reviewing its operational strategies. Although we are not actively looking at selling off any more fixed assets, this is one option that is not completely ruled out," he added.
JLA, established in 1942, is the main supplier of agricultural support and services to indepen-dent farmers. Its product range includes animal feed, animal health-care products, day-old chicks, agriculture chemicals, herbicides, pesticides, hardware items and farm and garden supplies.
Its 7.5 per cent preference shares listed on the Jamaica Stock Exchange currently trade at J$1.50. The stock sees minimal trading.
Rainford said that the company plans to do a rights issue, but not before bolstering its capital base - now at J$417 million - and returning the company to profitability.
"We hope later to go to the market with a rights issue, that is our intention, but we hope to turn the corner and start making a profit with sufficient injection of working capital in the company," he said.
While the sale and production of day-old chicks continue to perform relatively well, it is in the animal feed and merchandise business line that JLA is experiencing losses.
During the reporting period, improvements were reflected in the company's administrative and finance and selling expenses.
Finance cost dropped to J$2.4 million for the quarter, from J$17.7 million in the previous year.
"The improvement in finance cost resulted from using the proceeds from the sale of the feed plant and wharf facilities, among other things, to pay off costly bank loans," said Rainford.
The JLA, in a year, has cut its long-term debt from J$99 million to J$22 million.