Jeffrey Hall, CEO of Jamaica Producers Group.
Weighed down by another big gush of red ink in the third quarter, Jamaica Producers Group (JP) has reported a $1.5 billion loss for the 10 months to the first week of October, but the company's CEO, Jeffrey Hall, insists that shareholders can look forward to better times next year.
This year's loss was $800 million more than the corresponding period in 2007.
"It is a very active time of restructuring the operation to deal with the problem of significant losses and we hope to produce improved results in 2009," Hall told the Financial Gleaner.
"We are putting in place a series of realistic, pragmatic measures to cut cost, diversify and grow the profitable part of the business," he said.
Hit by hurricanes
JP used to be a big grower and exporter of bananas from Jamaica, as well as a manufacturer of juices and soups in Britain.
But in recent years the company has been hit by hurricanes in Jamaica that devastated farms here. In the UK, high oil and commodity prices, which jacked up operating costs, have now been followed by a soft market and consumers grow conservative with their pocketbooks in the face of a recession triggered by the global credit crisis.
The upshot: a decline in revenue and increase in the cost of generating its income, even as JP scampers to reorganise its business.
For instance, for the corresponding 40 weeks to the beginning of October last year, JP had operating income of $10.2 billion, which cost it $8.2 billion to generate. By the time its marketing, administrative costs and taxation were taken into account, it had a net loss of $326.45 million.
Gross profit
This year, however, turnover was $9.7 billion, which cost $9.05 billion to realise, leaving a gross profit of $690 million, far too little to sustain all the other costs of running the business, including charges for restructuring, such as shutting down its Jamaica banana farms, making staff redundant and revving up its snack food operations here.
The bottom line was the heavy 10-month loss, to which the last 16 weeks of the review period contributed a negative $514.17 million. That third-quarter loss was on gross operating income of $4.03 billion.
"The management and board of the group understand that the current level of losses is unsatisfactory and unsustainable and, therefore, we are focused on a return to profitability," Charles Johnston, JP's chairman and major stockholder said in a statement to the market.
JP is listed on the Jamaica Stock Exchange.
As part of the restructuring efforts to which Hall and Johnston alluded, JP has sold off some of its juice and fresh-food operations in Britain and has said that it will exit other non-core businesses. It has also acquired a fresh juice and smoothies firm in Holland and is seeking to expand in the European market. In the Caribbean, it is seeking to expand its market for snacks such as banana and cassava chips from factories in Jamaica and the Dominican Republic.
Extremely difficult
But even as Hall and Johnston remained confident about a turn-around and a stronger performance next year, analysts here warned the job will be extremely difficult.
"We do not have a positive outlook for the stock at this time, as they have significant challenges ahead of them in terms of the banana market, a devaluing euro and sterling, coupled with an overall slowing of the global economy," said Christopher Chin-Loy, who heads the brokerage unit at the investment bank, Scotia DBG.
"These effects will all weigh heavily against the company, at least over the coming year, giving us a fairly difficult outlook for a turnaround for the company's earnings," Chin-Loy said.
sabrina.gordon@gleanerjm.com
Producer's House, the corporate base of Jamaica Producers Group, on Oxford Road, New Kingston, is seen on the right in this December 2005 Gleaner photo. - File