Share price in Caribbean Producers Limited (CPJ), which closed at $4 per unit yesterday, reflected a seven per cent decline after the company made a preliminary disclosure on the likely impairment to net profit for the financial year ended June 30, 2016.

The pending occurrence — the company said by way of notice made to the Jamaica Stock Exchange (JSE) — was due in the main to “unregulated players in the market (who) continue to create an inequitable environment for the company to compete against products of questionable origin and repute.”

New CEO David Lowe told the

Jamaica Observer that the company thought it wise to warn the market that CPJ was engaged in realigning its business model with one-off provisions which would be reflected at the year end and would impact profit.

“It will be a one- off provision which will not change our core business,” he said, adding that earnings would be impacted both by the compounding effect of new costs attributed to expansion and the impact of competitors who appear to be bringing in and selling uncustomed goods, thereby undercutting price.

“While the Minster of Finance is going after them, it is a problem which needs to be addressed with urgency as the government itself will lose revenue both from the ports and from taxes. They will cannibalise smaller companies which employ people and stunt their growth

“They are not playing by the rules. We welcome competition, but it cannot be that we are getting competition from such sources,” Lowe said, hinting that these were competitors with no fixed address and no warehouse which could be inspected.

The JSE notice from CPJ read, “CPJ views these issues as material primarily for the fiscal year ended June 2016, and anticipates the authorities will aggressively target the unregulated players….The new fiscal year CPJ will concentrate on rationalising non-core businesses and a realignment to address the year-on-year increase in costs associated with rapid growth and new investments while focusing on protecting profitable lines of businesses.”

Lowe stated, “We are not only concerned about profit. We are concerned about food safety and consumer safety,” noting that the sellers who were making incursions on the hotel and retail market were very obviously “not playing by the rules,” offering obviously repacked foods and wines at incredible prices.

CPJ, a wholesaling, distributing and manufacturing company, is headquartered in Freeport, Montego Bay, St James. Its business includes wholesaling and distribution of foods and beverages, the distribution of non-food supplies and the manufacturing and distribution of fresh juices and meats.

The incursion from unregulated sellers, the JSE notice indicated, has resulted in a review of the implications for CPJ’s business model and a plan to take actions which will include the “write -down of inventory that has become aged or obsolete that cannot be competitive against unregulated players”, CPJ said; and make an increase in tax provision in anticipation of realignment changes to CPJ’s business model.

Noting that CPJ pays about $3 billion in taxes on an annual basis, CEO Lowe said he was satisfied that the authorities were aware of the problem posed to legitimate operators by those who broke the rules — and would be moving to do something about it.

CPJ, he said, has been growing rapidly, and would continue to do so by leveraging core business lines for growth in the tourism sector, retail and offshore. It would tread cautiously in areas affected by unregulated activity, until the problem is resolved.

For the nine months ended March 31, 2016, CPJ reported net profit of US$2.3 million, down four per cent from the US$2.4 million earned the year before. Revenues rose US$4.79 million or 7.4 per cent to US$69.79 million, year over year.

The company said that there were marked increases in sales of seafoods, spirits and beverages year over year. Selling and administrative costs increased by 16.4 per cent to US$14.7 million during the nine months.

For the six-month period to December, revenue reflected 8.5 per cent growth to US$45.41 million. Net profit for the company surged 73 per cent to US$1.76 million for the six-month period, compared to US$1.01 million earned at December 2014.

In November 2015, the company opened a new joint venture operation in St Lucia — CPJ St Lucia — with Duboulay’s Bottling. CPJ holds 51 per cent of CPJ St Lucia through its subsidiary, CPJ Investments Ltd. CPJ invested EC$25 million in the new plant.