These are proving testing times for Desnoes and Geddes (D&G), the company that produces Red Stripe, Jamaica's leading beer. According to audited statements for the year ended June 30, 2007 D&G's turnover came to J$11.3 billion, a 12 per cent increase on the J$10.1 billion posted in the prior year.

The group posted a pre-tax profit of J$2.1 billion, a fall on the J$2.3 billion posted the previous year. Net profit attributable to shareholders took a substantial hit and was just J$1.42 billion. This compares with J$2.2 billion registered for the year ended June 30, 2006. Trading profit declined by 5 per cent, coming in at J$1.89 billion for the period under review. Last year D&G's trading profit came to J$1.99 billion. So why this fall in trading profit?

The group attributes it to rising operational and marketing costs. This year has seen the group up the ante with its marketing efforts. Both Live Red and Red Stripe Temptation Isle (RTI) were national campaigns aimed primarily at the next generation of Red Stripe drinkers. For the period under review, D&G spent J$1.31 billion on marketing efforts, almost J$314m more than it did in the previous year. Administrative expenses also increased. For the year ended 2006, expenses came to J$750.2 million, J$52 million more than the J$802.4 million registered for the period under review.

The decline in net earnings was also a result of Red Stripe no longer benefiting from a tax holiday of sorts that has existed for the last five years. For the year ended June 30, 2007 the group's taxation charges came to J$691 million as opposed to J$113 million in the previous year.

However, D&G did have something to raise a glass to with its volume going up 8 per cent year-on-year. Domestic volume was 14 per cent higher with all brands - Red Stripe, Red Stripe Light, Guinness, Heineken, Dragon, Malta and Smirnoff Ice showing growth.

Total export volume was 3 per cent lower than the previous year mainly due to the inclusion of large one-off shipments of Guinness to Trinidad in the previous year. Shipments to the US and Canadian markets grew by 4 and 33 per cent respectively. Exports to other markets including Australia and Europe also registered growth.

Increases in production and shipping costs including fuel, electricity, port charges, labour and raw materials resulted in the year's gross profit margin declining to 34.91 per cent, down from 37.53 per cent in 2006.

In February of this year, D&G became the authorised dealer in Jamaica of spirit brands owned by its parent company, Diageo. This spirit portfolio includes Johnnie Walker, Smirnoff Vodka, Baileys, Myer's Rum, Tanqueray, Bell's Whiskey and Gordon's Gin. The financial impact of this move on the group's results was not felt, due to the timing of the transaction.

Earnings per stock unit for the year ended June 30, 2007 stood at 50.62 cents whereas last year it was 78.74 cents. Dividend amounting to J$0.53 per stock unit or J$1.48 billion was paid during the year.

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