Thursday 9 April, 2020

Seprod cites $814 million loss in 2019 for discontinued sugar unit

Seprod CEO Richard Pandohie

Seprod CEO Richard Pandohie

The acquisition of the Facey Consumer Division in the fourth quarter of 2018 and an increase in the export business drove profit for Seprod Limited last year.

Revenues from continuing operations were $34.35 billion, an increase of $11.85 billion or 53 per cent year on year. But one-off losses, particularly from the sugar business impacted these results.

Directors said in the preliminary year-end report that the closure is expected to positively impact the group’s return on equity and its cash flows in the future.

The report signed by chairman P.B Scott and CEO Richard Pandohie pointed to new positives, which were the performance of the new Facey consumer division portfolio and the climb in exports.

In May 2018 Seprod struck a deal with Musson to acquire its consumer goods distribution operation.

Under the deal, Seprod acquired warehousing space and real estate at 53 and 61 Newport Boulevard at Newport West, Kingston, as well as some food brands.

Back then Chairman Scott said the deal would enhance earnings for Seprod and boost its cash flow.

In total, net profit from continuing operations for 2019 was $1.99 billion, an increase of $510 million or 34 per cent increase of $11.85 billion over 2018.

Directors stated that the increase in profit was due to efficiencies gained from internal reorganizations of the ingredients, distribution businesses and from the consolidation of the dairy business.

During 2019, management closed the Golden Grove sugar factory and brought to an end what was described as 10 years of operational losses from sugar manufacturing.

Losses from this discontinued operation (inclusive of redundancy payments and estimated impairment losses) amounted to $814 million.

The resulting net profit for the year was $1.18 billion, an increase of $119 million or 11 per cent over 2018.

The result, directors highlighted, was impacted by the one-off costs related to the Golden Grove closure and to the dairy consolidation.

In 2016 Seprod purchased a dairy-processing factory in Bog Walk from Nestlé, which ceased manufacturing in Jamaica. It subsequently closed its own factory in St Thomas and integrated operations in Bog Walk.

Acquisition costs and upgrades, including new product lines and quality systems put in place, amounted to $7 billion.

The cost also covered consolidation under the Serge Island Dairies marque. The company has turned to building capacity for a 24-hour operation in St Catherine.

 “2019 has been a year of consolidation for the Seprod Group, directors said in the year-end report.

“The difficult decisions taken has placed the group in a very good position to generate sustainable value creation for 2020 and beyond,” the directors stated.

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