Hit by a nine per cent drop in volumes during its June quarter and higher costs, Red Stripe saw its net profit, when compared to the comparative period last year, drop by 64 per cent to $189 million.

But the falloff in earnings negatively impacted the firm's working capital - as at June 30, 2008 Red Stripe had $125 million more in current liabilities than it held in liquid assets, even after taking near-$700 million in short-term loans.

"The general operating environment, reduction in sales and increased raw materials and overhead costs adversely affected working capital throughout the year,"said the company's financial statements. "As a result, the company utilised existing short-term lines of credit."

The group paid out large dividends relative to its cash from operating activities during the year. Net cash provided by the group's operating activities was $680 million during the year under review, yet the firm forked out $1.1 billion in dividends
Moreover, even after taking $679 million in short-term loans to bolster its cash position, the firm still forked out $562 million in dividends during the June quarter.

At the end of June, the group had cash and cash equivalent totalling $184 million compared to the $468 million it held at June 30, 2007.

The local brewer ended its year on June 30, 2008, with a two per cent decline in sales volume and a 26 per cent drop in net profit.

For the nine months to March 31, the company had a marginal decline in profit and a marginal increase in sales volume.

According to the firm, in its financial statements issued to and posted online by the Jamaica Stock Exchange (JSE) yesterday, price increases helped increase revenue but was insufficient to cover "increased production, overheads and marketing costs."

Revenue during the three months to June 30 totalled $3.2 billion, four per cent higher than the comparative period in 2007.

Marketing costs went up 14.5 per cent to $381 million for the quarter, however, while cost of sales climbed 13 per cent to $1.87 billion. General, selling and administration expenses climbed by 19 per cent to $295 million.

Red Stripe blamed the decline in domestic volumes on the "gradual decline in purchasing power throughout the year" while "strong performance in Europe was offset by discontinued shipments to Australia and a marginal decline in Canada and the Caribbean region".

Despite the significant falloff in gross profit after marketing costs for both domestic and export side of its business, the local brewer still managed to turn a profit from both segments.

The domestic segment earned $576 million in gross profit after marketing costs while the export segment eked out $2 million.

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