Tuesday 2 June, 2020

FosRich monitoring risks associated with COVID-19

FosRich  Managing Director Cecil Foster speaking at the company's listing on the Jamaica Stock Exchange in 2017.

FosRich Managing Director Cecil Foster speaking at the company's listing on the Jamaica Stock Exchange in 2017.

Though admitting the enormity of the impact of the spread of novel coronavirus (COVID-19) on the Jamaican economy, the management of Fosrich Jamaica Limited is insisting that leadership can turn things around.

Managing director, Cecil Foster said in the company’s first-quarter report to the Jamaica Stock Exchange (JSE) that the economic effects may become material for the company, its suppliers, customers and financers.

“The prolonged epidemic threat increases the risk of economic slowdown, which may affect our performance. We continue to monitor and manage this risk,” he outlined.

Management said that despite staff shortages resulting from quarantine the company has managed to keep all our stores open.

“We will continue to execute on our plans to ensure that we remain competitive and deliver value solutions to customers,” Foster said.

Despite presenting improved revenues for the first quarter March 2020, Fosrich saw a significant fall-off in profit.

Revenues of $448.8 million were up 19 per cent from $378.6 million in the March 2019, but net profit of $4.8 million, was down 85 per cent from $32.9 million in the prior period

Earnings per stock unit of $0.01 were down from $0.07 in March 2019.

While Fosrich reported increased sales in the industrial, control devices, panels and PVC categories, administration expenses rose to $145.6 million, reflecting an increase of $31.5 million on the prior reporting period amount of $114.1 million.

Management said the increases were as driven primarily by staff-related costs for increases in team size and increased sales commission due to improved sales performance.

There were also higher finance costs of 26.2 million compared to $21.2 million for the prior reporting period, an increase of $5 million.

This increase is being driven by a new bond issue, obtained to assist with the financing of operations.

Foster said the company is keeping a close eye on inventory balances and the supply chain, with a view to ensuring that inventory balances being carried are optimized.

This is being done relative to the pace of sales, the time between the orders being made and when goods become available for sale, to avoid both overstocking and stock-outs.

Monitoring is both at the individual product level and by product categories.

During the quarter, industrial, hardware, panels and electrical lighting were the categories that reflected increases while LED, control devices, solar, wires and lighting were the inventory categories that reflected a decrease.

Foster said the company continued to closely manage receivables with an emphasis being placed on balances over 180 days.

He noted, “we have implemented strategies to collect these funds as well as to ensure that the other buckets are managed.”

Sixty-two per cent of receivables are within the current to 60-day category.

The company’s payables are categorised by foreign purchases, local purchases and other goods and services.

Management indicated that it is concentrating primarily on foreign payables as the bulk of inventories are sourced from overseas.

The company’s non-current Liabilities have increased by net $35 million due to the use of an existing line-of-credit facility.

At the end of the quarter, shareholders’ Equity Shareholders’ equity stands at $796.4 million, up from the $791.6 million at 31 December 2019.

Foster stated, “COVID-19 is a tragedy of currently unknowable proportions, bringing devastating consequences for individuals, families and communities far beyond its epicentre.”

He said the company has adopted all of the safety measures being promulgated by the Government of Jamaica.

Foster said the company was cognizant that despite the challenges ahead within this operating space, it has “the right talents and leadership to deliver on our plans for the ensuing period.”

 

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