Despite growing revenue by 19 per cent to surpass the $11-billion market for the first time, Lasco Manufacturing Limited (LASM) is still seeking potential acquisition opportunities as it expands its product range and market segments.

Lasco Manufacturing has been mentioning for almost two years that is has been in search for an acquisition opportunity. While a business acquisition was one possibility for the manufacturer, Managing Director James Rawle highlighted that a brand acquisition or investment is also on the table once it fits into the company’s strategic profile. The return on equity was 18.76 per cent for the 2023 financial year and has been in the high double digits for several years.

“We’re not interested in acquiring for acquiring sake. We want to be sure that what we’re buying, if we eventually buy, is not dilutive to what we’re doing, or if it is even dilutive in the short term, it can be turned around quickly as we’re focused on invested capital. Potential acquisitions must have a good strategic fit with what we’re doing and offer attractive financial returns. We’re prepared to invest and to build a brand or a company if it has the potential in our estimation to be turned around quickly,” said Rawle in a recent call with the Jamaica Observer.

This comes following the historic 2023 financial year ending March 31 where volume growth improved in the powder and beverage segments along with exports rising in the Guyana, Barbados and United States of America. The strong performance resulted in the company’s cash pile swelling to $2.22 billion, short-term investments to $1.66 billion and its debt being cut in half to $157.18 million.

“If eventually we don’t find anything that fits, we’re open to investing and we have investment plans which I can’t go into details just yet. We have reduced debt and built up a substantial cash reserve and therefore, we’re positioning ourselves for additional investments to expand the range of products we’re doing if that becomes the solution we can execute,” Rawle added.

Rawle’s comment comes at a time when the company improved its capacity utilisation and efficiency of its White Marl, St Catherine, location resulting in its margins remaining stable around the 36 per cent region, despite a spike in raw material prices. The company also benefited from the return of out of home consumption which was coupled with the introduction of revamped and new products in the reduced sugar line. It also plans to introduce new brands in the next month barring additional delays from shipment delays and supply chain issues which still affect the company today.

“There is still capacity to be exploited, but we have improved our capacity utilisation because it goes to operational efficiency. The volume growth we saw was easily obtained in terms of capacity of the plant. It doesn’t make much sense you have spare capacity for products that can be profitable and you’re not trying to utilise it,” Rawle explained on the plant capacity.

This growth plan is set to be supported by investment in the marketing and promotion with its distributor Lasco Distributors to strengthen the distribution strategy both locally and abroad under the current Lasco Food Drink and iCool brands. However, the ethos of late Chairman Lascelles Chin on maintaining products with good nutrition, value for money and affordability will not be compromised.

While the company saw a drastic increase in its top line costs, its general expenses only increased 15 per cent which resulted in operating profit rising 21 per cent to $2.69 billion. After accounting for reduced financing costs and a higher tax bill of $584.23 million, Lasco Manufacturing’s net profit grew 22 per cent to $2.08 billion with earnings per share (EPS) coming in at $0.50. This is nearly double the $1.08 billion achieved in the 2019 financial year and represents the first time any Junior Market company has surpassed the $2 billion net profit mark.

Total assets for LASM rose 14 per cent to $13.74 billion with current assets hitting $8.58 billion in the period. The company invested $200 million into tranche II of the Mayberry Investments bond with its quoted equities portfolio seeing a rebound at the end of March. Total liabilities stood at $2.64 billion with shareholders equity coming in at $11.10 billion.

Despite surpassing JMMB Securities EPS target of $0.41 and Barita Investments’ EPS target of $0.49 for the 2023 financial year, Lasco Manufacturing’s stock price has yet to return to pre-COVID levels with its June 2021 price hitting $6 and August 2019 price hitting $6.50. The company earned $1.08 billion in the 2019 financial year with a $0.26 EPS.

The closing price of $4.43 as of Monday gives it a market capitalisation of $18.31 billion which firmly puts it back in first place as the largest Junior Market company by market cap. This also resulted in a price to earnings (P/E) ratio of 8.79 times which is nearly half of the Junior Market average. Its book value is $2.69 which gives it a price to book value of 1.65 times, which is below the 3.0 times average.

Lasco Manufacturing shareholders are set to receive a $0.12 dividend on July 14 for shareholders on record as of June 30. This payment totals $495.95 million and is a 20 per cent increase compared to the $0.10 dividend paid last June.

Following the passing of Chairman Lascelles Chin, Rawle has been appointed chairman of the boards of Lasco Manufacturing (LASM), Lasco Distributors (LASD) and Lasco Financial Services (LASF) effective June 15. This comes nearly three years after he was appointed deputy executive chairman in September 2020 for LASM and LASD and almost a month after being appointed deputy executive chairman for LASF. Chin’s thanksgiving service will be held next Wednesday at the Holy Trinity Cathedral in Kingston.

“We’re cautiously optimistic that this [financial] year will be an even better year than last year, and we have the capacity to meet the demand both locally and in the export markets. We’re not quite sure where inflation is going and it’s not only location inflation. A lot of the materials that we use are imported materials. So, it depends on what happens in the global market and geopolitical developments that is unstable at the moment,” Rawle closed on the outlook for the 2024 FY.