The Blue Power Group is set to take off in 2022 through a number of elaborate initiatives, which will see the company expanding and diversifying its revenue streams.
In addition, the Dr Dhiru Tanna-led listed company is hoping to claw back ground lost in the Caricom market as a result of its trade war with Dominican competitor, DCP Successors Limited. In that trade war, the Jamaican soap manufacturer received an adverse ruling from Caricom's Council for Trade and Economic Development (COTED) in November 2020 after a complaint brought by DCP Successors. DCP Successors has since then filed a suit in the local court against Blue Power, Jamaica Customs Agency, and the Trade Board.
In his quarterly report to shareholders, Tanna, who chairs the Blue Power Group, articulated an elaborate plan, which he hopes will see the company expanding, increasing profitability, growing market share, and diversifying its revenue streams. He also used the opportunity to announce the latest company financials for the August to October period, the company's second quarter. It showed the group generated net profits of $149 million compared to $22 million in the second quarter of 2020.
Year-to-date net profits were $195 million compared to $50 million for 2020. In focusing on the production and sale of a wide range of bar soaps for domestic and export markets, which accounts for the major share of Blue Power revenues, the company intends to make another go for the Caricom market, where recent changes to the application of regional trade rules would adversely impact the near-term prospects for exports to this important market.
Restoring export market
There was a 25 per cent reduction in year-to-date revenues, due mainly to the reduced Caricom exports as a result of the new trading rules within the region and the trade war with DCP Successors Limited. Blue Power Group says it has a clear plan to address the challenges related to market access in Caricom and to improve the operating profits of the group.
This includes further differentiation of the company's product by emphasising its local content and will ultimately include completion of the installation of saponification equipment for the production of soap noodles in Jamaica. The installation of the saponification equipment was cited as one method in which Blue Power could employ to get around the adverse ruling by COTED, thereby returning its special duty access within the Caricom market.
This is part of Blue Power's programme of capital investment to increase the local value-added component of its soap manufacturing. Blue Power reports that its own brands and that of its co-packing clients remain attractive to distributors and consumers within caricom and the wider Caribbean Diaspora.
In an apparent swipe at DCP Successors, Dr Tanna remarked that Blue Power “will vigorously defend its legal rights to access these international markets competitively”. The income from the core soap business is supplemented by investment income, as well as income from rental property and warehousing operations.
The company has also entered into an agreement to acquire additional property, which is located directly in front of its Victoria Avenue complex, to facilitate expansion. This property is suitable for the development of warehousing to generate additional income from rental and warehousing operations and administration.
Over time, the property will also be suitable for the expansion of the core soap business. Investment income includes earnings from equity and fixed-income securities. During the review quarter, Blue Power secured a contract to manufacture soap for some of the leading brands of laundry bar soap and bath soap in the Jamaican market.
Production of these soaps will commence in the third quarter. As a part of this project, Blue Power acquired additional soap manufacturing equipment that will improve both the capacity, as well as the operating efficiency of the company.
Blue Power has launched an aggressive programme to diversify revenues and expand production capacity and efficiency. The company will selectively realise investment gains to ensure that the capital and liquidity required to fund this expansion programme will be readily available.
During the course of this financial year, Blue Power will begin to co-pack an expanded range of products for the Jamaican market and intends to return its focus to developing the exports of soap to Caricom markets and beyond.