Jamaican Teas is reporting the company had a challenging third quarter which has resulted in lower profit compared to the same quarter last year.

Net profit for the quarter ended June 30, 2022, was $24 million compared with $115 million in the previous year quarter.

The company said this was primarily due to the reversals at its investment subsidiary, QWI.

Jamaican Teas noted that during the quarter there was a poor performance of stocks on the Jamaican and USA stock exchanges with significant share price retracements overseas.

However, there was a stronger performance mainly in Jamaica’s Junior Market.

The reversals resulted in unrealised investment losses for QWI of $132 million in the quarter versus gains of $162 million a year ago.

Notwithstanding, QWI’s investment share portfolio outperformed its overseas benchmarks.

In its third quarter unaudited financials, Jamaican Teas said, “We are optimistic that our investment arm, QWI, is well positioned to benefit from the ongoing recovery in tourism in Jamaica, increasing employment and the positive profit results at several listed companies on the stock market.”

However, the company noted that rising interest rates here and overseas will prove to be a significant hindrance to the prices of all financial assets.

“This will temper the immediate prospects for future investment gains,” Jamaican Teas admitted.

In the meantime, Jamaican Teas export manufacturing sales rose by 40 per cent in the quarter as the division overcame the shortage of raw materials required to fulfil orders of finished products experienced earlier in the year.

Local sales improved by 10 per cent in the quarter over 2021.

Jamaican Teas was able to achieve this because of increases in inventory since September 2021 which reflected the build-up of raw materials to offset ongoing delays in the delivery of some items imported from overseas.

But it did not come cheap.

Much of the investment in inventories was funded by means of short-term borrowings which have increased by $128 million since September 2021.

Higher borrowings at QWI and the Manufacturing division drove up interest expense.

There was a 28 per cent sales increase in the quarter reflecting in part the absence of the COVID restrictions seen in 2021 and the return to regular operating hours.

The company is hopeful that as freight charges fall the raw material shortages will continue to ease further improving sales order fulfilment.

At the same time, while Jamaican Teas revenues have been increasing, higher cost of sales for both the quarter and the year to date have outstripped the revenue growth resulting in the loss of two percentage points of gross profit margin.

“This adverse trend resulted from sharp increases in ocean freight costs as well as increases in raw materials costs not yet fully reflected in prices to our customers. Price increases were effected in all our markets in January 2022 and again on July 1 2022,” the company said.

In the meantime, administrative costs rose and mainly reflects increased insurance and investment management expenses at QWI in the period as well as salary and wage increases at the manufacturing division.