Business

Jamaica Broilers holds steady

BY JULIAN RICHARDSON Assistant business co-ordinator richardsonj@jamaicaobserver.com

Wednesday, September 12, 2012    

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JAMAICA Broilers Group (JBG) has reported flat first-quarter profits of $127 million, but expects its bottom line to improve going forward this financial year.

Total revenues at JBG were $6 billion for the period ending July 28, 2012 compared to $5.8 billion over the same three months last year.

"The results are pretty much similar to last year's first quarter. In one context that can be seen as a positive based upon the challenges we are experiencing in the economy," said Ian Persaud, JBG vice-president of finance.

A weak economic climate, high levels of poultry imports and the skyrocketing of grain prices, due to severe drought conditions in the US, were part of the challenges over the period under review, reported JBG.

Sales increased by three per cent in the company's flagship Best Dressed Foods poultry division to $3.1 billion, and four per cent in the HiPro-Ace farm supplies segment to $2.2 billion, while falling by 29 per cent to $288.9 million in the ethanol operations over the July 2011 quarter. However, of the three units, only the farm supplies business produced an improved segment result — $230 million or 15 per cent more than the the 2011 first quarter — compared to the corresponding period last year. The poultry segment's results fell off by three per cent to $189 million while the ethanol division lost some $49.5 million over the period under review compared to a loss of $3.5 million over the same three months in 2011.

But Persaud anticipates that there will be huge improvements for JBG in both its poultry and ethanol businesses in subsequent quarters.

"The main chicken operation struggled a bit under the weight of some continuation of the imports that have been coming in, but we have started to see a reduction in those levels of imports so we anticipate that the broiler business, both ourselves' and small farmers etc, should be a little better in the quarters to come," said Persaud, adding that JBG's poultry operations in Haiti is also expected to perform well.

Jamaica Broilers launched a joint venture with a Haitian partner in 2010 to provide feed, chicks, pullets, equipment, and technical advice to poultry farmers, with the initial investment reported to be between US$2 million and US$3 million. JBG said it is encouraged by the reaction to its products and services in that country, where the business is already showing a positive gross margin.

"As far as Haiti, we have started to see some encouraging signs there. It is expected to enter into positive territory before the close of the calendar year," Persaud added.

The JBG vice-president of finance is even more optimistic about the company's processing and sale of fuel grade ethanol. JBG reported that, as of July 2012, tolling contracts are in place for the remainder of the fiscal year and beyond.

"The ethanol division is more likely going to kick in in quarters two, three and four," said Persaud. "We have contracts that take us almost running to capacity for a fair part of the financial year going all the way through to April 2013."

Persaud noted that the cost of grains, which has increased from 55 to 60 per cent over the last couple of months, in what has been described as the worst drought since the 1930s, remains a challenge. But he said that there are encouraging signs that prices may have stabilised.

"So if there are no further increases, while we are going to have some price movements in the next couple of months, at least with the mere stability in the US$8 per bushel region, it should not be too onerous," he said.

JBG reported that management was constrained during the July quarter to pass on the cost increases on grains. The company said it is working on a couple of initiatives to minimise the level of increases to the consumer going forward, including a project to plant in excess of 500 acres of corn locally.

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