Jamaican Teas Limited’s (JTL’s) pre-tax profit during the three months to June 30, 2010 dropped by 24 per cent from year-earlier levels to $11.8 million. Higher advertising cost and exchange losses resulting from an appreciated Jamaica dollar ate away at the 67 per cent improvement in gross profit.

Administrative expenses increased by 54.6 per cent from $9.8 million in the June quarter of 2009 to $21.67 million in the quarter under review, resulting in large part from increased advertising dollars spent on stimulating sales in the context of the “poor economic climate” existing in the main market, according to JTL CEO, John Mahfood.

The Jamaica dollar relative to its main trading counterpart — the US — appreciated by 4.5 per cent during the review period, which resulted in exchange losses of $3.7 million compared to a gain of $3.3 million observed in the comparative period last year.

But even while the company experienced exchange losses during the quarter, Mahfood sees the appreciation as a positive factor going forward given the large proportion of his firm’s output that is sold to the domestic market.

“The effect of revaluation is to reduce the cost of our imported raw materials,” he said. “This will impact us positively as more than half of our sales are local.”

Revenues for JTL — formerly Tetley Teas Jamaica Limited — increased by over 40 per cent, or $52.5 million dollars in the quarter over year-earlier levels, while operating profit increased by 26.8 per cent to $15.6 million.

However, the jump in sales was largely owing to the commencement of JTL’s newly acquired supermarket, which commenced operations on March 30 and which generated sales of $38 million. The supermarket made a los of $600,000.

Mahfood pointed to two events that he anticipates will generate improvements in profit for the company going forward.

“The performance of our supermarket is expected to improve as a result of increases in both customer count and average basket size,” Mahfood said. “We will be exempt from income tax as a result of the listing on the Junior Stock Exchange.”

After tax, JTL’s bottom line was actually $7.7 million during the three months to June 30, 2010. The company began enjoying tax-exempt status since July — after the quarter under review — and was not required to make financial statements available for the quarter as the listing on the Jamaica Stock Exchange (JSE) Junior Market had taken place on July 12, 2010.

“Although it is not a requirement of the JSE for us to release unaudited results of the group since we were listed after the June quarter, the Board of Directors felt that we should issue them to keep investors abreast of developments within the group,” John Mahfood, CEO said in a statement to shareholders.

The JTL group comprises the tea company which imports and packages teas, manufactures tea bags and distributes the finished product; a supermarket JRG Shoppers Delight and H Mahfood and Sons Limited, a residential property rental company.