John Mahfood, CEO of Jamaican Teas Limited (JTL), disclosed this week that the company was selected as the preferred bidder for KIW International Ltd – facilities which the company wants to use to expand its own operations.
The company earlier made a bid to acquire the Government of Jamaica’s (GOJ) 42.9 per cent interest in the property which comprises factory and warehouse space and is located at 138 Spanish Town Road in Kingston 11.
“At the date of this report we are awaiting the sale agreement,” Mahfood said in the company’s third quarter report through the Jamaica Stock Exchange (JSE).
JTL processes local teas which it packages along with imported teas and distributes them to the Jamaican and overseas markets.
Subsidiary JRG Shoppers Delite Enterprise Ltd is in the retail distribution of consumer and household products; and H. Mahfood & Sons Ltd is in the business of rental and development of residential properties.
For the nine months under review, JTL posted net profit of $89.95 million, or 28.5 per cent more than the similar period in 2015 when earnings were $70.02 million.
Revenue for the group passed the one billion dollar mark during the quarter to reach $1.08 billion, compared to $935.25 million in the nine-month period to June 30, 2015.
Earnings during the third quarter were $27.58 million, compared to after-tax profit of $26.78 in the similar quarter last year. Revenue for the quarter was $363.16 million compared to $324.31 million in the June quarter last year.
The company in its third quarter added several new products to its portfolio, including sea salt in bags, instant sorrell ginger sachets, and instant coconut chocolate sachets.
Mahfood noted that over the nine months under review, the Group enjoyed improvement in gross profit margins as “we were able to hold cost to levels that were below the increase in sales”.
“The improvement in the gross profit margin was due to a combination of volume growth, continuous cost improvements and lower input costs that also allowed for increased investment in our products,” he added in comments attached to the third quarter’s report.
Specifically, he said, “The third quarter recorded a 12 per cent or $39 million increase in sales over the same period in 2015 to $363 million. Year-to-date sales surged 15 per cent or $140 million over the same period during the prior year to reach $1.076 billion.”
Local sales for the Jamaican Teas products grew by 24 per cent in the quarter and 17 per cent for the nine months, while export sales declined by two per cent in the quarter but increased by five per cent for the nine months. Supermarket sales were up by 10 per cent in the quarter and 10 per cent for the nine-month period.
Mahfood noted, “Export sales can be unstable depending on shipments; as such, focus should be placed more on the year-to-date performance than purely the quarter.”
The CEO said sales in the group’s fully owned supermarkets have been moderate, but that the 50 per cent-owned supermarket in Montego Bay “remains a challenge in a competitive environment”.
For Orchid Estate the group has completed more than 60 per cent of the units sold and is awaiting disbursements on the sale of another 20 per cent.
For the group, he said, changes in working capital include $196 million of costs associated with the Orchid Estate project, the group’s real estate venture.
“Receivables declined by $93 million from the year-end balance due partially to collections from completed sales of our residential real estate project,” Mahfood explained.
The increase in accounts payable balance by $43 million represented purchase of inventories for manufacturing, he said.
JTL indicates it repaid the bank loan associated with the Orchid project, with Mahfood adding that it is expected that the rest of the development will be funded from internally generated funds.
At the end of June sale agreements were signed or pending signing on 90 per cent of the units in Phase II.
JTL’s group had a negative cash balance of $29.7 million at June 30 compared to a smaller deficit of $15.27 million in the similar period last year.