TWENTY per cent of firms listed on the Jamaica Stock Exchange (JSE) had reduced cash positions totalling $4.4 billion combined, citing that profit doesn’t necessarily translate into more cash.

Locally based companies were running cash deficits, such as Jamaica Broilers Group (JBG), or saw their cash and cash equivalent balances slashed by 20 to 98 per cent over the year including Scotia DBG, Mayberry, Hardware & Lumber, Pulse, Cable & Wireless Jamaica, Pegasus, and Seprod. These companies had utilised cash for investments or debt payment during the quarter.

“If one were to ask where is the cash, the answer is simple, it has gone into paying down the debt. It is a strategy of the group to use the cash flow into reducing debt exposure. It is balance sheet management,” CEO at JBG Christopher Levy told the Observer in an interview last week.

JBG, which sells mainly poultry and ethanol, recorded a $119-million cash deficit despite posting $327 million in net profit down 29 per cent over the prior year’s quarter. Its net cash position although negative had improved from the $1.7-billion deficit in January 2009 due to the refinanced debt relating to its ethanol plant.

Hardware giant H&L saw its cash and equivalents dip 98 per cent to $6.5 million at December 2009 versus $308.6 million a year prior. The depletion of cash was mainly due to its bank overdraft of $140.6 million versus $60.8 million a year prior. Contrastingly, the company reduced its net loss to $66.9 million over three months to December versus a $265-million loss recorded in the prior year’s quarter.

“The results for the fourth quarter continue to reflect the effects of the general economic slowdown and the decline in local construction activity,” stated H&L CEO Simon Roberts in notes accompanying its financials. “We expect 2010 to be challenging. The recent Government of Jamaica initiatives are expected to lead to a compression in purchasing power in the short term; however, we are hopeful that economic activity will increase in the medium to long term.”

Scotia DBG (SDBG) the brokerage firm, cut it’s cash and equivalents by 43 per cent to $4.6 billion as at January 2010 from $8.15 billion in January 2009 due to redeploying cash into longer term securities and investments.

“There is also no overriding negative impact on the company going forward. We are still maintaining sufficient liquidity to manage operational requirements,” Anya Schnoor executive vice-president of Wealth Management and Insurance and CEO Scotia DBG told the Business Observer in a written response. “Treasury would typically hold liquid assets as part of their overall liquidity (to) cash management strategy but there has really not been the need for SDBG to hold excessive levels of liquid assets. Also, in light of the declining interest rate environment, there has been some thrust in the past few months towards securing longer tenured instruments to boost portfolio yields. These factors would have contributed to the reduction.”

Modelling agency, Pulse Investments saw its cash position decline 58 per cent to $10.8 million at December 2009 from $24.8 million a year prior even though it reported record profits over three months to $121.3 million at December 2009 versus $102.6 million in the prior years quarter.

Pegasus Hotel of Jamaica’s cash balance declined 35 per cent to $88.1 million at December 2009 versus $135.9 million in 2008. It reflected the hotel’s expansion that resulted in a $14.3-million net loss as at December 2009 versus $4.7-million profit a year prior.

Telecom firm, Lime (Cable & Wireless Jamaica) saw its cash and equivalents cut 40 per cent to $503 million at December 2009 from $864 million in the prior year’s quarter. It mirrored the group’s $351-million loss over the 2009 review period versus $32.5-million profit in the prior year’s quarter.

Brewer Red Stripe saw its cash and cash equivalent decrease 20 per cent to $674.8 million at December 2009 from $852.6 million at December 2008. However, mirrored the company’s 45 per cent profit decline at $301.2 million over three months to December 2009 versus $551.2 million over the prior year’s quarter.

Brokerage house Mayberry Investments saw its cash and equivalents cut 38 per cent to $398.5 million at December 2009 versus $645.8 million a year prior. The reduction occurred despite reducing its net loss to $36.3 million over 12-months ending December 2009 versus a $132.9 million loss in 2008.

Manufacturer, Seprod saw its net profit after tax balloon to $1.4 billion from $938.2-million a year prior but lower cash flowing in decreased its balance by 26 per cent from $380.1 million in 2008 to $275.4 million in 2009.

Other companies were recovering from 2008 cash deficits but some still have not posted profits. Carib Cement’s cash position improved to $81.87 million in cash and equivalents up to December 2009 from a $10.28 million cash deficit in December 2008 but made $144.5 million loss for its year end December 2009 versus $416.4 million profit a year prior. The company directors stated that they were affected by competition and the contraction in the Jamaican economy which took place throughout 2009, resulting in the domestic market for cement declining by approximately eight per cent over the previous year.

Berger Paints Jamaica improved its cash flow dramatically resutling in a balance at the end of its financial year of $100.6 million versus a cash deficit of $20.2 million in 2008. It reported quarterly profit of $44.78 million as at December 2009 versus $25.1 million in 2008.

Micro-lending firm Access Financials increased its cash balance from a deficit of $1.1 million in 2008 to a cash surplus of $28 million at December 2009 mainly aided by its share offer on the Junior Stock Exchange which pumped $92 million into the business.

Media giant RJR saw its cash and equivalents jump from $13.1 million to $146.9 million over the year reflecting the doubling of its three months net profit to $103.6 million as at December 2009 from $52 million over the prior year’s quarter.

Brokerage firm Jamaica Money Markets Brokers increased its cash and cash equivalents held from $1.68 billion to $2.6 billion as at December 2009. Its profit was $286.3 million three months to December 2009 versus $635.6 million over three months ending December 2008.

The Jamaica Livestock Association (JLA), which supplies feed and livestock, saw its bank overdraft increase to $136 million in November 2009 versus $109.1 million a year prior, however, its net cash position improved to $1.9 million versus $1.2 million a year prior. JLA, in early 2009, told the Business Observer that it needed an infusion of working capital as it was affected by expensive credit and supplies.