JLA still in the red
Third quarter financial statements from the Jamaica Livestock Association (JLA) showed the organisation was still reeling from losses that continued from the last year while the only profitable segment of its operations saw decline in earnings from year-earlier levels.
The JLA represents the independent livestock farmers of Jamaica, provides agricultural products and services including animal feed, day old chicks and animal health care services. Its three business segments are in the sale of animal feed, the production and sale of poultry and merchandise, which includes the sale of animal health care products, hardware, lumber and cement.
Of the three segments, only poultry returned a profit — $10.4 million — for the organisation at the quarter ended August 31, 2010, albeit 73 per cent lower than the comparative period last year.
“The reduced result for our poultry division resulted from higher input costs as well as higher mortality caused from among other things, the impact of the Tivoli Incursion in May this year,” JLA chief accountant, Albert Walker told the Business Observer.
“The increased input cost from grain and poultry definitely impacted negatively on our operations. Unfortunately, in a highly competitive environment, one player cannot arbitrarily increase its selling price to the consumers. You are therefore forced to absorb some of these higher input costs,” Walker went on to say.
Feeds and merchandise returned losses at $15 million and $70.4 million, respectively, with the feeds segment’s results reflecting a 63 per cent improvement over last year, while the merchandise segment, doubled its loss over the corresonding period in 2009.
The JLA made a $67 million loss from operations in the 2010 quarter, $36 million more than the loss made in the similar period of 2009.
“The increase in loss from the merchandise segment for the nine months of 2010 versus 2009, resulted from lower sales. This in itself resulted from lack of sufficient working capital,” Walker added.
He told the Business Observer that even though he anticipates an improvement within the coming quarters, the gains from feeds will be marginal as the segment operates on ‘very tight margins’.
Just this month, poultry farmers in Jamaica warned of increasing costs following the rise in grain prices in the United States, the major supplier of grains to the local market.
The cost of corn increased 50 per cent from July this year, while the cost of soya increased 25 per cent. The cost of feed make up 30 to 40 per cent of the cost of poultry production.
Indeed, even while the organisation’s operating revenue increased to $228 million for the August 2010 quarter, $34 million or 15 per cent more than the corresponding quarter last year, the cost of earning that additional revenue jumped 33 per cent to $186 million, thus offsetting the revenue gains.
A tax credit of $12 million in the 2009 quarter also partially reduced the losses reflected in that year. JLA’s administrative expenses also reduced five percent as a result of “operational efficiencies as well as the benefit from the revaluation of the Jamaican dollar vis a vis the US dollar,” Walker said.
“The increase in the overall loss position from $23.8 million in 2009 to $30.1 million in 2010 resulted from income tax credits in 2009,” explained Walker. “It should be noted that whereas the pre tax loss in the third quarter of 2009 was $35.7 million, it fell to $30.1 million in 2010.”
Jamaicans consume an estimated 220 million pounds of chicken meat per year. Of that amount, between 15 to 20 per cent of the chicken meat market is supplied by farmers who purchase day old chicks from the JLA.