Honey Bun is betting big on growth, but the price tag is showing up in its bottom line.

The bakery company’s aggressive expansion drive has pushed revenue to $1.04 billion for the first quarter of its 2025 financial year, yet net profit slid 11 per cent to $76.9 million as rising costs and capital investments strained cash reserves.

With the near-completion of its new production and distribution facility in Angels, St Catherine, Honey Bun has opted to self-finance the project, leading to a 44 per cent drop in cash holdings to $284.7 million, down from $508 million a year ago.

“This decrease is directly attributable to our expansion project, where to date we have financed the development from cashflow,” CEO Michelle Chong said in the statement accompanying the financial results.

Honey Bun’s expansion into Angels, St Catherine, is designed to address escalating product demand and operational constraints at its current Retirement Crescent facility. The company has committed J$1 billion to establish a 160,000-square-foot production plant within the MJS Industrial Park, a project poised to more than double its manufacturing capacity.

So far, the St Catherine project has significantly impacted the company’s balance sheet, with total assets surging 46 per cent to $2.72 billion. Much of this increase is tied to prepayments on equipment and services for the new plant, as well as a sharp rise in lease liabilities under IFRS accounting rules.

“As a result of the company’s capital investment in the new production and distribution facility in Angels, St Catherine, Rights-of-Use assets and the corresponding lease liability have increased significantly in accordance with IFRS Accounting Standards,” she said.

At the same time, operating expenses jumped 23 per cent to $391.9 million, reflecting increased administrative and distribution costs. Despite these pressures, Honey Bun improved its gross profit margin to 48 per cent, up from 46.2 per cent a year ago, showing some operational efficiencies.

Alongside its infrastructure investment, Honey Bun is also expanding its brand portfolio. The company’s acquisition of the Swirls brand in mid-2024 is part of its strategy to diversify revenue streams and strengthen its position in the fast-food pastry market.

“The increase in intangible assets relates to the goodwill recognised on the purchase of the Swirls brand in June of 2024,” the company disclosed, confirming that the acquisition has added to its balance sheet.

Honey Bun is prioritising long-term growth over short-term profitability, a move that has temporarily impacted its cash flow and net income. However, management remains confident in the strategy.

“We take this opportunity to thank our loyal customers, directors, employees, and other stakeholders for their continued support,” she said.

— Karena Bennett