H&L back in the black
Published:Wednesday | February 16, 2011 | 12:00 AM
Hardware and Lumber Limited, the operating company for the Rapid True Value chain, made J$33 million of profit in the fourth quarter in a reversal of fortunes despite flat revenues.
The stock traded up 15 cents or 3.23 per cent to close at J$4.80 on Tuesday.
The turnaround was due to lower cost of doing business, as well as a substantial reduction in financing charges as the company shed long term debt.
Hardware and Lumber took in J$1.55 billion of revenues in the fourth quarter ending December 31, compared to J$1.54 billion in the 2009 period, but more than J$60 million of savings on the cost of sales, plus another J$12 million of other income produced a solid J$60 million of operating profit for the company, compared to J$2.8 million in the 2009 period.
"We continue to improve product variety and availability, and remain focused on improving our working capital position through the aggressive collection of receivables and retirement of expensive debt," said chief executive officer Simon Robert in a statement appended to the financial results.
For the year, the company pulled in revenue of J$5.73 billion, which was 3.4 per cent below the J$5.94 billion earned in 2009. But its move to contain cost was rewarded by a J$92 million surplus on operations that reversed J$28.5 million of operating losses the previous year.
H&L made net profit of J$19 million for the year to erase a loss of J$226 million in 2009, due in part to the shrinkage of debt financing charges to a quarter of 2009 levels - from J$267 million to J$68 million. A portion of those savings resulted from foreign exchange translation gains of J$27 million, compared to forex losses of J$103 million in 2009.
Improved profit outturn
The company shed J$162 million of long-term debt over the year, from J$296 million to J$134 million.
"Reduced finance costs from both lower debt levels and recorded foreign exchange gains on US-dollar denominated debt also contributed to the improved profit outturn," the company said.
The change of fortunes follows a series of changes that included new management, staff cuts, and ongoing remodeling of the stores to mimic the look of its American minority partner, True Value.
H&L also expects savings in the year ahead from the transfer on December 1 of its distribution functions to a third party.
Among H&L's three business segments, wholesale hardware contributed J$891 million, down from J$1.1 billion; retail household also dropped slightly to J$3.49 billion at the end of 2010 from J$3.5 billion in 2009, but the agriculture division bucked the trend to increase revenue from J$1.28 billion to J$1.34 billion, and was also the only segment to report pre-tax profit, which grew from J$98 million in 2009 to J$158 million in 2010.
"This segment is performing well, and product demand remains strong as our farmers work towards recovering from the poor weather conditions in September and October and severe drought conditions in the first six months of the year," said H&L.
Hardware and retail household lost J$35 million and J$98 million, respectively.
The two segments continue to be impacted by a slowdown in the construction sector, the company said.