Lasco Manufacturing Limited (LASM) is planning to launch a suite of new products over the next three months as it continues to capitalise on the increasing demand from the open economy.
The manufacturer, which operates out of White Marl, St Catherine, currently produces products ranging from Lasco powdered foods to iCool drink lines. With there being relative stability in the supply chains and the return of in-person schooling and events, Lasco Manufacturing believes it is the right time to introduce and publicise new products to the market.
"With respect to new products, before the quarter is out, we'll introduce some new products in the liquid range. We have launches planned for quarter one of the new [financial] year. We've seen a gradual pick-up of the categories that cater to the on-the-go consumption and out-of-home consumption since the reopening of the economy," said Managing Director James Rawle in a call with the Jamaica Observer last week.
The company is preparing to develop some new flavours to its reduced sugar category for both schools and supermarket shelves under the Ministry of Health and Wellness' guidelines. The reduced sugar focus is currently a key focus for the company in its powder and drink lines as it ensures it remains relevant to its consumer base whose consumption habits are expected to adjust in line with nutrition values.
This also fits into LASM's strategy of increasing its marketing spend into the new financial year which starts on April 1. During the first nine months, the company spent more on face-to-face engagements with consumers and was even a sponsor of the Caribbean Premier League cricket tournament which Rawle said garnered interest for the different brands.
"Export is still a major thrust and we see it as an important part of the mix that we have to offer. We've been working very hard in the export sector because in the Caribbean basin and eastern seaboard of the United States, there's a lot of potential and we really have been working assiduously with the distributor [Lasco Distributors] and export team to build volumes in those markets. Guyana is receiving special attention because Guyana is picking up consistently with the boom that they are having there," Rawle added on the company's export vision.
Lasco currently exports to most of the Eastern Caribbean and has two agents in Guyana focused on the distinct product lines.
LASM's third-quarter (October to December) revenue grew 19 per cent to $2.86 billion with gross profits coming in 17 per cent higher at $1.08 billion. However, the company's gross margins declined from 38.40 per cent to 37.77 per cent on a comparative basis.
"The philosophy that we have is we try to be more efficient on the operational side so we can lessen the impact of the operations on cost. The focus we have is improve the operational efficiency and rigid cost control. So, our price increases can be contained. In the last three months, we didn't increase our prices. Before that, we took price increases. They were never enough to offset the price increases," Rawle explained surrounding the margin compression in the company's recently released quarterly report.
The company's third quarter operating profit rose by 17 per cent with overall net profit coming in at $487.57 million, a 21 per cent improvement. This resulted in earnings per share (EPS) growing from $0.10 to $0.12.
"We're not exploiting the full capacity and one of the most inefficient things to do is to have idle capacity because you're paying for it. Lasco has always been growing organically. So, the idea is that we invest in marketing to push consumption, we formulate new products that are relevant to the consumers that we can exploit the full capacity of the plant," the managing director expounded on the manufacturing plant's capacity.
The powder division was expanded two years ago which has assisted the company in meeting the higher demand from the market. LASM spent $90.88 million in capital expenditure for the nine months period which included new machinery to improve the efficiency of operations.
The company also spent an additional $248.13 million in inventory over the same time period as it ensured it could handle any possible delays or increase in product costs. This has pushed the inventory balance up to $1.99 billion with most of it being raw materials and packaging, along with some finished products.
"We took a decision during COVID to expand our safety stock of critical materials because of the instability of the supply chain and the frequency of products not being able to arrive. We're still overstocked and we're in the process of working that down. We have to be very cautious as some supplies coming out of Europe and the war [have] affected some things," Rawle regarding the effort to reduce inventory.
LASM's nine-month performance saw revenue increase 18 per cent to $8.33 billion and net profit growing 16 per cent from $1.19 billion to $1.37 billion. This translates to an EPS of $0.33 and leaves LASM on track to exceed 2022's earnings of $1.71 billion or $0.41.
With the company only having $200 million remaining in debt and $3.31 billion in combined cash and short term investments, LASM is effectively in a position to explore acquisition routes. While nothing has materialised in recent times, Rawle highlighted that the business needs to be accretive, have good brands that can grow and in the same space of nutrition, food and drink. It also must be able to demonstrate strong future growth similar to the company's current double-digit ambitions for year on year performance.
"We're thinking ahead and looking for strong organic growth. We've always said that we're looking for partnerships, strategic fits and if there's an acquisition that makes sense in terms of what we do, we want to stay in the area of food and nutrition and refreshing beverages. If brands or a company comes along that is of interest and looks good, scalable, and not dilutive to the business or has the potential to be profitable given proper management, we'll consider that [acquisition]," Rawle stated.
Total assets increased 12 per cent year over year to $12.99 billion with current assets climbing to a record $7.73 billion. Total liabilities declined nine per cent to $2.59 billion while shareholders equity grew 18 per cent to $10.40 billion with a book value of $2.52.
The stock price marginally increased on February 10 when the report was released, but has since retraced to $4.07, which leaves it with a market capitalisation of $16.80 billion. The trailing 12-month earnings per share is 8.98 times. Mayberry Jamaican Equities Limited sold 4,083,435 shares over the nine months with Wayne Chin joining the top 10 shareholders.
"In conjunction with distributors, we're looking at larger volumes, new products, improving our distribution efficiency and efficacy to get the products more widely distributed. It's already quite good, but there is room for improvement. These are the drivers we have for growth," Rawle closed.