JP extends shelf life of juices; eyeballs new products, markets

Jamaica Producer Group's snack food business has underperformed in the first half of the year, which the company blames on low yield from its banana farms.

JP Tropical Division made a loss of J$27 million in the period on reduced revenues of J$613 million. JP said a 36 per cent weather-related decline in banana production impacted unit costs and "suppressed" sales volumes.

JP Europe Division, the core of the Jamaican company's operation, made a profit of J$125 million, but this was a decline from J$135 million at HY 2011.

The group, however, reported a fivefold growth in profit at midyear, bolstered by a one-time billion-dollar gain from disposal of investments. More than two-thirds the profit, J$767 million, was booked in the second quarter; the conglomerate made J$1.12 billion over six months ending July 2, 2011 on flat revenues of J$3.1 billion.

Jamaica Producers has said it plans to use the liquidated funds for future growth plans, but for now it has parked the proceeds in repos, as shown on its balance sheet at July 2.

Those plans could include coffee production, if the joint JP/Pan Jamaican takeover of Mavis Bank Coffee Factory is successfully negotiated with the Development Bank of Jamaica. JP's last new venture, Four Rivers Mining Company, a joint-venture construction aggregates business, is fully up and running. However: "Sales volumes remain below the break-even level but are increasing steadily," Johnston said.

JP said its business in Europe - comprised of the juice operations in the Netherlands and shipping/logistics services in the United Kingdom - was hit by an economic environment characterised by high raw material commodity prices and prolonged uncertainty.

JP said earnings from its logistics business was affected by new and intense price-based competition in the market for services to the Caribbean.

"Our immediate measures to maintain profitability have included a review of customer contracts to allow for sharing of the raw material price risk and further investment in plant, equipment and technology to improve our operating efficiency," group chairman Charles Johnston said in his report to shareholders.

"We are particularly focused on products that will allow us to effectively target new markets for our juices and fruit-based products."

Group managing director Jeffrey Hall told the Financial Gleaner that the company was in the process of installing new equipment that would give extra shelf life to its fresh fruit juices and allow it to enter new markets in northern Europe. He had previously disclosed a J$100-million investment in extending the shelf life of the juices.

"We are focusing on countries in northern Europe, including Germany, Scandinavia, Holland - northern Europe in general," Hall said.

JP Europe's sales rose marginally in the half year in Jamaican dollar terms, rising from J$2.38 billion to J$2.41 billion, but only because the local currency has weakened against the euro and the pound.

JP Tropical's turnover fell 9.6 per cent, from J$678 million to J$613 million. Jamaica Producers said the challenges faced by its farms and snack business were only partially offset by the introduction of bammies and pineapple products and the importation of snacks from its joint-venture factory in the Dominican Republic.

The company said summer is traditionally its quietest sales period, and so it does not expect profitability to fully recover until later this year.

Johnston said that internally, JP was focusing its human and financial resources on continuing new product development "and are refining a number of innovations for launch later this year."

mcpherse.thompson@gleanerjm.com