National Meats reports J$1.3b of debts
Published:Friday | December 10, 2010 | 12:00 AM
David Phillips is not inclined to say much about his faltering business.
He confirms that it has ceased trading, but insists that National Meats and Food Distributors Limited has not closed down, nor has it been sold.
The distributor of frozen meats, poultry and seafood to the hotel industry has done no business since June, around the time Phillips was engineering a job cut as a cost-saving measure.
"We are not trading, (but) we are not closed," he said this week.
Phillips, the company's managing director, said his efforts are concentrated on collecting outstanding receivables.
Indeed, financial data on his company obtained by the Financial Gleaner indicate that he needs all the cash he can get.
National Meats disclosed on its 2009 annual returns that it was more than J$1.32 billion in debt.
Its 2008 audited financial statements also show continuous losses and, at the time, J$1.56 billion of accumulated deficit.
The company, in 2007, racked up losses of more than half a billion dollars. It bled another J$708 million in 2008. At the same time, a moderate J$68-million stash of cash was depleted to a balance of J$4.7 million, and National Meats' bank overdraft shot up tenfold from J$15 million to J$148 million.
National Meats' chief creditors are RBTT Bank Jamaica, and a company called Hart Hill Trading Limited, which the distributor names as a related party and from which it has obtained 11 "unsecured" US-dollar loans. Phillips produces Hart Hill juices from his Lydford, St Ann, operating base.
At year end September 2008, National Meats owed those two entities J$2.3 billion, of which at least J$550 million would have become due for repayment to Hart Hill in three weeks, on December 31, as disclosed in a schedule in the notes to the accounts.
But it also says the Hart Hill liabilities are subordinated to the RBTT bank debt, which in 2008 amounted to J$761 million on 17 US-dollar loans priced between 5.89 per cent and 8.5 per cent.
The Hart Hill debt carries interest of 11 and 18 per cent.
"The loan repayments have been postponed until after the full settlement of loans currently due to RBTT," the note read.
The receivable that Phillips is attempting to collect is valued at or around half a billion dollars, if trends are maintained from three years ago.
There have been reports that Phillips is seeking a buyer, but he declined to be drawn on the future of the company he founded 25 years ago.
"Whatever is happening can't be disclosed at this time," he said.
Based in Lydford, National Meats was incorporated in 1985. Phillips personally holds 77.5 per cent of the company's 10,000 issued shares, while the other 22.5 per cent are held under an offshore company called Export Traders Limited, registered in British Virgin Islands.
The company initially started with the distribution of local meats to the hotel industry and later expanded into exporting Jamaican beef to other Caribbean countries.
According to information from Alljamaicajobs.com, in 1989, the company expanded its product line to include imported beef, mutton, poultry and seafood. A year later, it had begun to dominate the market as it became the largest distributor of frozen meats, poultry and seafood to hotels.
During 1993, the company expanded its distribution channels to include supermarkets, wholesale businesses, restaurants and others. Then, in 2001, National Meats started warehousing and distributing for KFC, Wendy's and Pizza Hut.
Still, the meat market is highly competitive. Not only would National Meats have to contend with poultry producers Caribbean Broilers and Jamaica Broilers, it would later be tested in the seafoods segment by newcomers such as Rainforest Seafoods, as well as imports from Asia.
In July, National Meats admitted to a weakened financial position and eliminated 131 jobs. The company, at the time, had said the cuts were "due to the company's deteriorating working capital and inventory shortages".
The job cuts involved all departments, from managerial to line staff.
The company, two years ago, had no working capital.
It then owed trade creditors J$1.4 billion in payables that its own receivables and inventories, and bank accounts were insufficient to cover, falling more than half a billion dollars short.
And while National Meats' fixed assets had improved substantially from J$995 million to J$1.7 billion in book value, its accumulated debt erased its capital base, which then sported negative equity of J$1.3 billion.