Wednesday 17 July, 2019

MDS remains profitable despite foreign exchange hurdles

Medical Disposables general manager Kurt Boothe

Medical Disposables general manager Kurt Boothe

The volatility of  foreign exchange fluctuations has affected several local businesses over the past year  but Medical Disposables, a healthcare and consumer products distributor, was able to weather the storm and remain profitable, 

"The nature of the Jamaican economy leaves businesses and the wider economy highly sensitive to movements in the price of the Jamaican dollar, but we were able to overcome the challenges and still maintain a profit," general manager Kurt Boothe said.

During the past financial year, the company generated profit before tax of $123.3 million, which was $13.7 million or 12.5 per cent above the previous year ended March 31, 2018. MDS has a catalogue that spans pharmaceuticals, vaccines, injectables, hospital supplies, medical disposable items, medical sundries, consumer products and beauty items.

In a release to shareholders this week, MDS said that "Total non-operational expenses of $63.3 million increased by $31.1 million or 96.8 per cent. The increase was as a result of the significant loss on foreign exchange of $23.3 million calculated on the cost of goods purchased due to the devaluation of the Jamaican dollar to the United States currency. This was an increase of $25.9 million when compared to the previous year ended March 31, 2018.

"We will be implementing cash reserve strategies and we are in active discussions with our banking partners along the lines for forecasting in order for us to be proactive rather than reactive to combat any negative market shocks which may arise, so we can weather any storm ahead of time," Boothe said.

Notwithstanding the material foreign exchange losses incurred during the year, the Company still managed to generate profit before tax of $123.3 million, which was $13.7 million or 12.5 per cent above the previous year ended March 31, 2018.

The Bank of Jamaica has announced that the public should continue to expect an active foreign currency market and should adapt to the new realities.

“It is no longer a market in which the exchange rate drifts in one direction only, and as long as prevailing economic conditions remain as positive as they are, it is normal and to be expected that the exchange rate will keep fluctuating in both directions,” the central bank said in an earlier release.

Last year, MDS continued its rise, reporting that it had crossed the $2-billion threshold in revenues for the first time in the company's history. The business, which is listed on the Junior Market of the Jamaica Stock Exchange, made profits in excess of $100 million, following record gains during financial year 2017/2018.

The company continued to show robust growth in a number of areas. MDS reported a gross profit of $548.5 million for the year ended March 31, 2019, which represented growth by $87 million or 19 per cent when compared to the year ended March 31, 2018.

"Operating expenses of $361.9 million increased by $42.1 million or 13.2 per cent due mainly to the costs associated with our sales growth.  These operational expenses include salaries, commissions and related expenses, general insurance expense, delivery expenses, information technology consultancy fees, security expenses and utility expenses," the release said.  

Another mitigating factor which affected year-end profits for MDS this year was its payment of tax remission for the first time. The company is in now its sixth year since being listed on the Junior Market of the Jamaican Stock Exchange.

As a result, MDS is now subject to fifty per cent (50 per cent) tax remission as of December 24, 2018. As such, profit after tax grew by $3.2 million or 2.9 per cent from $109.6M for the financial year ended March 31, 2018, to $112.8 million at the end of the current financial year.

Total assets grew by 21.4 per cent or $200.8 million from $1.45 billion to $1.65 billion.  The company’s inventories and receivables balances increased as a direct result of the increased business opportunities, which are reflected in the overall increase in sales revenue.  These assets were supported by shareholders’ equity of $759.2  million and liabilities of $889.7 million, which grew by $86.1 million or 12.8 per cent and $114.7 million or 14.8 per cent respectively.  The company distributed dividends of 10.4 cents per share to shareholders during the current financial year.

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