SEPROD Group may have taken a hit from its participation in the Jamaica Debt Exchange (JDX) that could translate into tens of millions of dollars being shaved from its bottom line.

But the company’s aggressive expansion in manufacturing and dairy farming coupled with its foray into the cane industry will more than adequately cover fall-off in earnings from government paper.

Last week, Seprod reported a 58 per cent improvement in net profit, which totalled $1.49 billion for its financial year that ended December 31, 2009.

The increase at the bottom line did reflect continued improvement in the results for its manufacturing segment, which has more than tripled its profit from $361.8 million in 2006 to $1.3 billion last year.

The distribution segment’s profit also grew over the period — from $154 million in 2006 to $199.7 million in 2009.

Interest income, however, grew from $157.3 million to $432.4 million over the three-year period as Seprod’s investment in Government of Jamaica (GOJ) securities increased from $644.8 million at the end of 2006 to $1.97 billion as at December 31, 2009.

The group said that it had participated in the JDX, and that the debt exchange, which saw the Government exchange out 99 per cent of its domestic debt for new bonds at lower rates and longer maturities, had “a significant impact on the expected future cash flows form the group’s investment portfolio”.

Seprod outline in its most recent financial statements that it had exchanged $685 million in Jamaican-denominated securities and US$1 million ($89 million) in US-denominated securities in the JDX.

With the rated average rates being reduced on the Jamaican-dollar instruments from 19.13 per cent to 12.1 per cent and on the US-dollar instruments from 7.5 per cent to 6.75 per cent, Seprod is likely to see a reduction in earnings from these securities of close to $50 million this year.

“The group has instituted adequate measures to mitigate the impact of reduced investment earnings on its profitability,” said the company.

Seprod has significantly increased its capital expenditure programme for 2010, upping the figure it would pump into capital projects from the $250 million — $270 million it spent in each of the last three years to $463 million this year.

The group’s dairy division, which falls under Serge Island, increased the number of milk producing cows from 1,852 in 2006 to 2,130 last year and the number of heifers raised for producing milk from 1,212 in 2006 to 2,237 at the end of 2009.

Aside from growth in its dairy business, Seprod stands to start reaping the benefits from its investment in sugar cane, having bought out the Government’s sugar assets in St Thomas, last year.

At the end of 2009, the group reported that it had 77,488 tonnes of cane under cultivation, which was valued at $213.3 million as at December 31, 2009.

And even while interest income has grown significantly in the last four years, profit from manufacturing represented 59 per cent of the group’s operating profit, up from the 53 per cent that prevailed in the prior two years.