CARIBBEAN Cream Limited’s (CCL) posted a 29 per cent decline in second quarter net profit, with administrative expenses dragging down the bottom line.

The ice cream maker posted net profits of $2.8 million for the quarter ended August 2013, down from $4 million during the corresponding period last year. However, total sales were higher by 27 per cent, up from $165.5 million to $210.9 million during the quarter under review. The increase in sales were achieved despite heavy rains negatively affecting sales in the latter part of August, the company said in its unaudited financial statement.

Pre-tax profits were down by two per cent, attributed to a staff reorganisation exercise that increased administrative expenses.

CCL saw overheads increase significantly after taking over the operations of a depot in Montego Bay, which was previously independently owned. Its administrative and other expenses rose by 72 per cent during the period under review, up from $22.1 million during the same three months last year to $37.9 million. The move, however, is expected to be a major contributor to future sales and profitability.

“It was a strategic move because we wanted to properly feed the hotels that we have contracts with,” explained Christopher Clarke, CEO of CCL, which is behind the Kremi brand of ice cream.

The company, which also made a couple workers redundant due to medical reasons, now employ the staff at the depot, who will work to provide ice cream for Sandals and Jewel hotel on the North Coast. Rather than have a truck supplying ice cream islandwide as well as to the hotels, the company will now supply the hotels from Montego Bay with a small van.

CCL paid $5 million in tax during the period, $1 million more than the comparative period last year. But this will be readjusted to $0, said Clarke. Having listed on the Junior Stock Exchange it is entitled to a 10-year income tax break — the first five years at 100 per cent and the remainder at 50 per cent.

In August, the company increased its bank borrowings to support the expansion of its output capacity. It has a $64 million bank loan that will help to complete the construction of a cold room, phase one of the expansion project, as well as make early purchases needed for the build-out of a factory in phase two.

It is still on track to have a new cold room operational by the busy Christmas season. The new cold room will enable additional capacity for greater sales while decreasing energy costs per unit of the ice cream produced.

“This has the added advantage of increasing the quality of our product by shortening the freezing time,” the company said.