Despite the continued supply chain disruptions and rising commodity prices, Lasco Manufacturing Limited (LASM) grew revenue by 15 per cent to $9.48 billion and achieved its highest net profit to date of $1.71 billion, which did not include any tax remissions.

The company, which manufactures soy-based products and bottled drinks, has not seen a reduction in its performance since the novel coronavirus pandemic began in March 2020. Instead, it has inched closer to 13 figures in revenue and the $2-billion mark in net profit. This occurred when the company saw its gross margin decline from 37.89 per cent in 2021 to 36.75 per cent in 2022. The gross profit rose by 12 per cent to $3.48 billion.

“In the latter half of the year, we saw a pickup in categories such as refreshing beverages that are geared to on the go and out of home consumption. During the height of the pandemic, there was severely reduced consumptions of these products. We saw with the gradual relaxation of the COVID containment measures an increase in the uptake of refreshing beverages mainly in the Icool range. We’re still not back to pre-pandemic levels in terms of volumes, but we’re fast approaching that level,” stated managing director and deputy executive chairman of LASM James Rawle in a call with the Jamaica Observer.

LASM stock up on its inventory which grew 29 per cent to $1.62 billion. This was due to the company accounting for disruptions in the supply chain and also the risk arising from the rising commodity costs. The company has increased the prices of its goods in the last year, but has aimed to pass off some of those increases to its distributors and absorbed the rest as it aims to keep its products affordable for its customer base.

“We actually think the disruption in the global supply chain will continue for some time because it’s going to take some time to work through and the cost of shipping will remain high for some time. Since COVID-19 started, we took a positive decision to increase inventory levels. We’re holding higher stock in order to ensure the production can continue uninterrupted as much as possible,” Rawle expounded on the supply chain issues which will continue to impact the cost of goods.

While LASM’s utility costs amounted to $34.51 million, it’s been impacted by the rising fuel costs with the price of West Texas Intermediate prices trending above US$115 a barrel this week. Though it doesn’t use general gasoline for its operations, it uses liquified petroleum gas for its boilers and other machines. The company is currently resuming the solar energy installations related to the US$50-million energy alliance with the USAID (United States Agency for International Development).

LASM is currently looking to expand its export reach further up north as it seeks ways to grow its revenue base. Rawle did confirm that the new liquid products would be introduced in the second half of the year while the renovated powdered products would hit the shelves in that similar timeframe.

“The capacity was expanded in the last year, and it has given us the bandwidth to produce more. One of the drivers for growth is to not just sell more locally, but also to further develop the export market. We’re exploring other places such as the United Kingdom, but there are regulatory hurdles to be cleared. We’re going to be able to reduce our fixed costs by automating as much as possible,” Rawle explained. LASM spent $250.61 million in capital expenditure in its 2021 financial year (FY)

LASM’s long term debt balance has shrunk to $364.57 million with the company set to be debt free within the next two years. However, the managing director pointed out that the company is planning some significant investments which will require it to tap the debt market. The Bank of Jamaica has increased its policy rate from 0.50 per cent in August to 5.00 per cent last month. Some commercial banks have already confirmed their intention to increase the interest rates on variable rate loans for customers in the next two months.

“It could have a negative impact on investment, but we are in the process of finalising some investments such as expanding certain capacities. We can fund some of that, but we inevitably will have to go to market to borrow. It will make our projects more expensive. Generally speaking, rising interest rates will lead to a slowdown in investments, but we haven’t taken a decision to suspend investments. Our investment activities were hampered during the COVID-19 period because we couldn’t complete them,” Rawle stated on the rising interest rates.

LASM ended the 2022 FY with $12.07 billion in total assets with $2.03 billion in cash and cash equivalents. Its total liabilities and shareholders equity were $2.72 billion and $9.35 billion, respectively. Its stock price remains up 9.71 per cent year to date at $5.21 which gives it a market capitalisation of $21.54 billion.

“We see some opportunities and are doing everything to grow this business. We’re going to hold onto the increases in volumes we’ve had over the last two years. It means we have to invest wisely, get marketed and keep our brands at the top of mind. We have to invest in adequate distribution to see that our products are available. Our products must have a strong value proposition that people will want to buy them because it delivers exactly what they’re looking for,” Rawle closed.