Oil spike boosts JPS revenue but slams profit
Published:Friday | November 18, 2011 | 12:00 AM
Net profit at Jamaica Public Service Company (JPS) was slashed in half to US$5.8 million ($503 million) amid escalating oil prices that have thinned the company's gross margins in the September quarter.
The power company, which holds a monopoly on power distribution and is among the largest corporations in Jamaica, earned US$300 million in total revenue for the quarter, up 24 per cent relative to year-earlier levels.
But its costs, which include fuel and non-fuel components, jumped much higher by 37.8 per cent over the period. This led to a four per cent drop in gross profit to US$74 million.
Fuel costs rose 41 per cent in the quarter.
The price of oil hit US$99.87 in the quarter compared with a high of US$80.70 in the corresponding 2010 quarter, according to New York Mercantile Exchange crude oil price data.
JPS usually recovers fuel charges from customers. The utility has previously said that it earns higher revenues but lower margins when oil prices spike. Conversely, the lower oil prices in the earlier quarters of 2011 resulted in JPS' nine-month profit increasing some six per cent to US$27.3 million over year-earlier levels off revenues of US$868.8 million.
For the nine months, revenue rose by US$167 million, or 24 per cent, but gross margins dropped three points from 30 per cent to 27 per cent.
Marubeni, based in Japan, and Korea East-West Power Company (EWP), based in Korea, each own 40 per cent of the company, the Government of Jamaica owns 19.9 per cent, while 3,000 shareholders own the remaining 0.1 per cent of the shares.