JDX blamed for plunge in Lascelles profit
Published:Friday | December 2, 2011 | 12:00 AM
Steven Jackson, Business Reporter
Conglomerate Lascelles deMercado recorded a 15 per cent dip in net profit to $2.36 billion for the year ending September 2011, as it earned nearly $1 billion less from investment as a direct result of the Jamaica Debt Exchange (JDX).
Excluding the JDX adjustment, net profit increased eight per cent year on year, management said in statements accompanying the financials.
"The decline in profitability has been impacted by the large IAS 19 employee benefit adjustment in 2010, which increased the profit of the investments segment in that year," stated the financials, posted this week on the Jamaica Stock Exchange.
"This adjustment largely reflected the reduction in long-term interest rates subsequent to the implementation of the Jamaica Debt Exchange in February 2010," the company said. "Excluding the effect of IAS 19, adjustments from both years profit before tax would have shown an increase of eight per cent above the previous year," it added.
Three of the five segments of the conglomerate made increased profit year on year with the liquors, rum, wines and sugar division up 12.3 per cent to $1.55 billion; general merchandise up 25 per cent to $545 million, and the general insurance division up 28.9 per cent to $449 million.
Declining segments included the investments division, dipping 66 per cent to $467 million, compared with $1.38 billion in 2010, and the transport segment down 16.2 per cent to $27.9 million.
The cash and equivalents at the company actually remained flat at $5.6 billion, down $61.9 million year on year, due to a $4-billion dividend payout.
Lascelles' parent, the cash-strapped CL Financial based in Trinidad and Tobago, would have received the bulk of this dividend, as it ultimately owns 87 per cent of the spirits company.
The company's management earlier in the year refused to confirm or deny linking the "larger than usual dividend" to money owed to bondholders.
Creditors owed
Bonds issued by the subsidiary CL Spirits should have matured in January 2010, but CL Financial bought time following a series of negotiations with stakeholders. In October, CL Financial paid some US$20 million with another US$20 million slated for yearend.
Creditors in Jamaica and Trinidad are owed a US$342-million (J$29.4 billion) debt as a result of CL Financial's acquisition of Jamaican spirits conglomerate, Lascelles deMercado in 2008.
CL Spirits was the vehicle chiefly used by CL Financial to acquire Lascelles, as well as raise debt to help finance the US$9.25-per-share deal that closed in July 2008.
"After in-depth analysis of its cash needs and all strategies under consideration, your directors concluded that it was prudent and in the group's best interests for this larger-than-usual dividend to be paid," stated the directors' notes accompanying the financials.
Excluding the dividend and other smaller financing payments, Lascelles' cash position would have doubled to $4.4 billion from $2.2 billion a year earlier. Total equity at Lascelles declined by $600 million to $27.9 billion in 2011.