Beer company sales still flat
Published:Wednesday | May 25, 2011 | 12:00 AM
Beer maker Red Stripe Jamaica reported a five per cent gain in net profit for the third quarter, despite weak sales.
The company made J$126 million of profit at the quarter ending March, up from J$120 million in the 2010 period.
Sales declined by two per cent, from J$2.5 billion to J$2.45 billion.
The quarter's performance was not enough to lift the nine-month results, which reflected a 31 per cent decline in net profit, and a one per cent fall in revenue.
The company reported profit of J$445 million or J$15.86 per share, compared to J$645 million, J$22.96 per share, in the nine-month period for 2010, while revenue dipped to J$8.15 billion from J$8.2 billion.
The company reports that an increase in export sales helped to offset domestic declines.
"Weakness in the domestic alcoholic drinks market continues to have an adverse effect on our domestic volumes and revenues," said Red Stripe, whose flagship beer dominates the Jamaican market.
The company also distributes alcoholic drinks on behalf of parent Diageo Plc, and recently signed a partnership agreement with Hussey family-controlled Everglades Farm to distribute its new product Rum Fire.
Red Stripe, which is listed under its original identity, Desnoes and Geddes Limited, has been struggling to maintain market volumes and earnings, since the recession. The period was also characterised by fights over new taxes on the manufacturers of alcohol, with chairman Richard Byles at one point suggesting that the Golding administration's tax policy was anti-business.
The company is now going through leadership transition. Managing director Alan Barnes, who has held the job for two years, will make way on June 30 - the end of its financial year - for Renato Gonzalez, a Brazilian.
To offset sales decline, Barnes has been ramping up distribution in the export market and holding down cost.
"The business continues to focus on reducing production costs to offset the negative impact of the lower volume base," said the company's statement.
Cost of sales was down slightly for the nine-month period, but marketing and general selling and administrative expenses went up marginally.
A new contract inked in March to supply its lager to more than 3,000 rooms in the Gordon 'Butch' Stewart Sandals hotel chain in Jamaica and the Turks and Caicos Islands should help drive sales in the last quarter.
The company said a new plan to drive business would be communicated to shareholders in coming months.
Red Stripe now trades at J$3.30 on the Jamaica Stock Exchange and has a market value of $9 billion.
Going forward, the company said alternate ways are being explored to improve performance.