Jamaica Teas upbeat about future
Published:Wednesday | February 9, 2011 | 12:00 AM
Despite reporting a loss on its investment in Bay City Foods Limited, Jamaica Teas is upbeat about its future performance, banking on continued strong results from its tea business as well as JRG Shoppers Delite to offset the losses.
"We are starting from scratch and supermarket normally take up to a year to attract customers and cover expenses," said John Mahfood, chief executive officer of Jamaica Teas.
"Whether it was build or buy we were prepared to go through this period, so we are not concerned as we went in knowing that this will be the situation," he told Wednesday Business.
Jamaica Teas acquired a 50-per cent ownership take in Bay City Foods Limited, a supermarket located in the western end of the island, in November 2010, having invested some $16 million.
So far, Jamaica Teas has reported a loss of $3.1million on its share of the investment in the company for the first quarter ending December.
"While we expect that this investment will yield good returns in the long term, our forecast indicates that this operation is not likely to be profitable in the current fiscal year," states the board of directors report to shareholders.
Still, Jamaica Teas for the first three months of its fiscal year 2010-11 recorded net profits of $21.9 million, almost doubled when compared to the $12 million for the similar quarter in the previous year.
Total sales were also up, at $151.6 million at the end of the December quarter compared to $81.4 million for the corresponding period in the previous year.
Sales for the company's core business, manufacturing of teas, also improved by 15 per cent, representing volume growth in the business.
While the exact volume was not disclosed, Jamaica Teas is the largest producer of teas in the Caribbean, with almost one half its products exported other Caribbean markets and North America.
It produces over 40 different types of teas, with the company now valued at $673 million on the market. The company last traded at $4 on the Junior market.
In the meantime, JRG Shoppers Delite Supermarket continues to show improvement in quarter-over-quarter performance, reporting sales of $54.5 million.
Jamaica Teas first quarter results also benefited from a tax holiday, an incentive given to companies listed on the Junior market.
On balance sheet, the company states that at the end of the quarter total investments stood at $165 million, and expects to be an important income driver with positive cash flows.
Receivable remains strong with no bad or doubtful debts on the books.
Expenses for the reporting period showed slight movement, except for administrative cost, which jumped to $16.5 million, up from $5.3 million.
And so Mahfood continues to be positive in outlook as the company embarks on further expansion plans.
"The indications are that we will have a good year," he said.
He hopes that by July, Bay City Foods will reach break-even point, after which it will start to make small profits.
Within the next six months, he expects to double warehouse space to 18,000 square feet so as to expand production.
Expenditure of $3 million on racking and other improvements will also be made in the second quarter.
And while he did not disclose a figure, Mahfood also hopes to increase its export volume in the coming months.