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Salada achieves peak performance in year-end profits

Net profit increases 219%

Observer writer

Wednesday, December 05, 2018

Salada Foods Jamaica Ltd exceeded profits by 219 per cent year over year, according to audited financial statements posted by the group on the Jamaica Stock Exchange website last week, with profit after tax for the year ended September 30, 2018 reaching $219.2 million in 2018, compared to $68.7 million the year before.

Gross profit rose by $123.8 million to reach $400 million at year end, “buoyed by strong sales performance”, a release attached to the statements said.

The company noted that it realised growth both in local sales and export, with the latter far exceeding the results of the former.

“Domestic sales continue to perform well, growing by 16.7 per cent above prior year as we deepen penetration in existing channels and access new one. Sales to the trade through our distribution partner Lasco was $655, 13 per cent above prior year. Export sales also did well, as both the Canadian and Barbadian markets performed, growing year-on-year by 440 per cent and 220 per cent respectively,” the directors are quoted saying.

Salada also attributed the growth in sales to the introduction of a new product line as well as marketing initiatives to create traction.

“In May we launched our Mountain Bliss 876 (MB876) brand in keeping with our strategy to engage younger consumers. MB876 featured two SKUs — the Gold, which is a freeze-dried coffee; and the Classic, an agglomerated coffee. Within five months of launch we have gained retail distribution of 70 per cent,” the release states.

“The launch of MB876 and other marketing activities pushed selling and promotional expenses up 37.3 per cent or $12.14 million above prior year's $32.76 million,” it continues.

At the same time, administrative expenses declined by 43 per cent, falling from $148.9 million to $85 million. Other expenses also dropped to nil this year as the group received a “$34-million write-back against retirement benefits”, which was due to a decision taken by Salada to discontinue paying health insurance premiums for former staff members who have retired.

Finance income — comprising interest income and foreign exchange gain — also increased, moving from $9.8 million to $22.2 million year over year. Despite a slight dip in interest income, Salada recorded foreign exchange gain of $15.4 million due to the sale of US dollars.

Total assets for the group jumped from $957.5 million in 2017 to $1,106.7 million for the year under review, a 13.5 per cent increase. This despite finalising the sale of property — land and building — located in Kingston, based on information provided in notes attached to the statement.

However, audit firm KPMG noted a concern relating to the calculation of inventory for the period.

“In view of the group's manufacturing processes and its numerous product lines, the basis of cost calculation is complex and highly dependent of management's estimate. Due to the complexity involved, there is an inherent risk that a material misstatement could arise due to cost of inventory being incorrectly recorded,” the report states under key audit matters.

Cash and cash equivalents reduced from $146.3 million in the previous year to $80.9 for the year just ended. Notwithstanding, Salada paid approximately $103.9 million to shareholders in dividend.

Earnings per share increased from 67 cents in 2017 to $2.12.

Despite Salada's performance being historic, the directors note there are challenges currently facing the coffee industry as well as from a “regulatory regime”.

“In spite of that, we remain optimistic that our strategies to mitigate the impact to the business will be positively rewarded in the long run,” the release ends.

Salada Group is owner of subsidiaries Mountain Peak Food Processors Ltd and Pimora Company Ltd.