Salada sets strategy to improve profit margins


Salada sets strategy to improve profit margins

Friday, February 15, 2019

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LOCAL manufacturer of instant coffee products Salada Foods Jamaica Ltd will undertake a three-pronged approach to improve performance for the upcoming fiscal year, after posting a loss of $23 million for the December quarter of 2018.

General manager of Salada Foods Jamaica Limited Dianna Blake-Bennett in a press release yesterday said the company will focus on contract manufacturing, export growth and product development for fiscal year 2019.

Management's strategy to improve profit margins for the upcoming quarter also includes the acquisition of a secondary boiler, to be used as a mitigatory plan, after the business suffered interruptions in the manufacturing of its coffee and ginger products from an “accident in the boiler room” last quarter.

According to chairman Patrick Williams, both boilers were damaged and had to be taken offline in October, which resulted in revenue declines for the December quarter of 2018, moving from $227 million in 2017 to $172.3 million. Operating profit for the review period also fell to $15 million, down from $41 million in the comparative quarter.

Salada also moved from net profit of $26.8 million during the comparative quarter of 2017 to a loss of $23 million for the December 2018 quarter. Earnings per share of the company fell to -$0.22.

“The repairs took longer than expected and the main boiler only came back online at the end of November. While it was down, there was no production of coffee,” Williams noted. Nonetheless, the local processor said it was able to satisfy both the domestic and export markets as its distributors had sufficient finished goods in their inventories.

“Full production resumed on December 1 and we are now normalising inventory levels with our distribution partners. We expect to get back on track with our financial results by the end of the quarter,” he continued.

Blake-Bennett reasoned that although operations were down, the company opted to not lay off its production team members and was also able to engage in minimal packaging during this juncture.

“As such, many of the factory overheads would have been maintained during this period,” she said.

In the interim, Salada will pursue strategies to strengthen the local agriculture sector through the acquisition of local ginger and coffee cherries.

Salada's initiative to purchase 25,000 boxes of coffee cherries directly from farmers, which commenced on November 15, is advanced. It expects to reach the targeted spend of $200 million, inclusive of processing these cherries into green beans, by end March 2019.

“Salada Foods is pleased to support our local farmers at a time when their plight was at its peak. The injection of $200 million was a well-needed buoy for the local coffee industry. Going forward, the company plans to evaluate the feasibility of the initiative as a sustainable programme within its business model.

Additional, Salada recently acquired the Safe Quality Food Level 2 certification to support its strategy of engaging in additional contract manufacturing and exports.

“With this certification, we objectively assure our customers of the quality of our manufacturing processes which open doors for them to leading export markets. We continue to work actively with each of our export distribution partners, who are our ambassadors on the ground, to determine how to sustainably grow our market share,” Blake-Bennett said.

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