The following is the presentation made by the managing director of the Seprod Group, Richard Pandohie, at last Monday’s annual general meeting.

2015 REVIEW

2015 was a mixed year. On the macro-economic side, the massive reduction in global oil prices resulted in local electricity price being reduced from US$0.41 per KWH to under US$0.20 per KWH; providing a welcome relief to consumers, manufacturers and the Jamaican economy. This cushion was a key contributor to the predictability and stability to key macro indicators, thus enabling a more investment friendly environment. Seprod has been capitalising on this environment to drive its retooling and expansion efforts.

GOLDEN GROVE SUGAR COMPANY (GGSC)

Despite many activities within the Group, the issue that dominated the media landscape was sugar. That issue is well known, and suffice it to say, after many trials and tribulations, we are thankful to the Government and other relevant stakeholders for approving GGSC as a Marketing Agency (MA); thus enabling us to market and distribute our own sugar. This MA status is not a silver bullet, but it gives us an opportunity to be in charge of our own destiny. We simultaneously restructured the business to outsource the field operations to persons who do this as their core business. Our team will focus on improving the factory operations, exploring value-added opportunities, building the Golden Grove brand and distributing it throughout CARICOM and beyond. The retail packaging of our brand is the first step in value-added and it is now available in Jamaica, Cayman Islands, Barbados & Trinidad.

The El Niño-induced drought of 2014/2015 devastated the quantity and quality of the sugar crop for 2016. We will end the year with a production of only 11,000 metric tonnes of sugar; well below the 16,000-18,000 metric tonnes required for the operations to make financial sense. Nevertheless, we continue to aggressively explore opportunities, such as liquid sugar and refined sugar production that will be financially positive, not only for Golden Grove but for the entire Jamaican sugar industry.

SERGE ISLAND

Farms

The farm operation was assaulted by the drought. The grass production and water availability fell precipitously, significantly impacting the operation’s productivity and production. The lack of rainfall was compounded by re-routing of rivers caused by the unregulated and unsupervised river mining activities that are occurring all over St Thomas, putting the business and communities at risk, not only for lack of water but also severe flooding when the rains come.

To mitigate the effect of future droughts, the company invested J$200m to put in new wells and irrigation systems at the farms. Our target is to move from the 2015 figure of 8 litres of milk/cow/day to 15 litres/cow/day by Quarter 2 2017; currently we are tracking well and as of June, we are at 11 litres/cow/day.

FACTORY

In the factory, we installed a new line valued at US$3.5m in 2015 and continue to make investments to drive production and innovation capabilities. Last year we told shareholders that the business would evolve from being a milk business to a dairy business. We promised you evaporated milk, condensed milk, whipping cream. Promises made, promises delivered. Serge evaporated milk and whipping cream have been in the market since January, and as of this past weekend, the “World of Serge” welcomed Serge condensed milk.

In 2016, we invested approximately J$70M to address an issue that is a problem for many of our population and I am now delighted to announce that in two weeks, Jamaican consumers will be able to purchase Serge lactose-free milk, thus getting all the benefits of real milk (protein, calcium, vitamins) without the impact of lactose.

INTERNATIONAL BISCUIT LIMITED

Over US$2.5M was invested in retooling the processing side of the biscuit factory. The factory was closed for a couple of months and re-opened in April 2016 with a 40% improvement in productivity. This gives us a solid base to continue the production of our own world-class Butterkist & Snackable brands; the globally recognised Ovaltine biscuits for Twinnings, and the amazingly addictive Ms Birdies for Purity.

CARIBBEAN PRODUCTS LIMITED (CPL)

Manufacturer of the iconic brands; chiffon margarine, Gold Seal, Uncle Sam and Lider oil. These core brands have remained the same for many years and now we are embarking on a journey to make them exciting again and remind current consumers of why their mothers and grandmothers fell in love with these brands in the first place.

JAMAICA GRAINS & CEREAL LIMITED

This operation is undergoing a massive expansion as we seek to scale up the entity to the point where we will be the most competitive provider of corn by-products in CARICOM. We are also investing in renovating the brands; on display, you will see new packages of cornmeal.

INDUSTRIAL SALES LIMITED

Our distribution arm is improving; eliminating non-performing skus and concentrating on building out its distribution footprint.

The Miracle brand is stepping up and an example of this is the Miracle Ketchup being selected as the product of choice for the 2016 CB Pan Chicken competition.

Ladies and Gentlemen, what I have just taken you through is a company that is committed to growth and this growth is built on the following pillars:

Pillar 1 — Innovation

Bringing new value propositions to our consumers. For an FMCG company, innovation is its life blood. Since we last met, we now have Serge evap milk, Serge condensed milk, Serge lactose-free milk and Golden Grove sugar.

Pillar 2 — Renovations

We are investing in our core brands and giving them a make-over to make them exciting again. Look at your new-look Serge full cream and low fat milk, new-look Miracle cornmeal; in the words of our Jamaican young people, the product them shot.

You have seen and heard our new ads in the traditional and social media landscape. The feedback from consumers has been overwhelmingly positive.

Pillar 3 — Building Economies of Scale.

This is critical to driving down our unit cost of production which will enable us to be price competitive and improve our margins. The more competitive prices will enable us to increase our export sales and actively replace imports. We are bringing back jobs to Jamaica and the Caribbean. Let me pause to say something about CARICOM and this call for boycotting of goods from Trinidad. At Seprod we do NOT see CARICOM as an export market; for us, it is an extension of our domestic market and we expect, actually no, we demand that the Government do their job and ensure that the rules of CARICOM are enforced so that we can access all markets without unfair barriers.

Pillar 4 — High Performance Culture

Another pillar is building a performance culture by attracting and investing in people who are passionate about our brands and our country.

Pillar 5 — Mutually Beneficial Partnerships

We want to partner with small farmers; in 2015, this country produced less than 12 million litres of milk; yet in 1994 we were producing almost 40 million litres; we want to work with the farmers to bring back the industry.

We want partnership with the unions to move Jamaican workers to a compensation structure based on productivity.

We want partnership with other companies where we can leverage each other’s strengths. Key examples of this include: us working with GK in some Diaspora markets; Seprod working with Nutramix, Fersan and JDDB to launch the “Drink Real Milk Campaign”.

We want partnership with educational institutions to build human capacity. The Seprod Foundation is working with the College of Agriculture, Science & Education (CASE) to build research capabilities, provide scholarships, internships and jobs for the students.

Partnership with our consumers. We have been proactively bringing value to our consumers; in 2015, we reduced the price on our Swizzle & Cool Fruit juices by 30% to reflect improved productivity in the factory and lower utility price. This year we have reduced the biscuit prices by 20% for similar reasons.

Ladies and gentlemen, the Seprod team is investing and investing heavily in Jamaica. We are a significant player in this country and it is our responsibility to be a key agent in making Jamaica a better place to live and work for ourselves and the generations to come.

We implore our politicians and technocrats to be sensible and not compromise the fledgling growth possibilities through ill-advised taxation measures and poor policy decisions. You cannot talk about growth in the agricultural sector but have a policy in place that has destroyed the dairy industry.

You cannot be forcing manufacturers to outlay millions of dollars for environmental compliance but then have no resources in place to stop persons bringing in goods that are flagrantly violating the country’s labelling requirements and undermining legitimate businesses.

You cannot ask companies to unfairly shoulder additional tax burdens when so much money is being left on the table due to poor compliance and collection by Government agencies.

We are cautiously optimistic about the country’s outlook; there is evidence of growth occurring but it is early days and it must be nurtured carefully. With respect to Seprod, we are positive that we will grow and deliver improvement in shareholder value.

I want to end by thanking the Board for their confidence and support; the management team for their passion and commitment to the cause; to each and every employee in the company for the contribution you are making to ensure that we can truly say “Made at Seprod, Must be good’ and finally, I want to thank our consumers and customers; without you, the dream is impossible.

Ladies and gentlemen, thank you.