Seprod to maintain currency position despite FX losses in Jun 2010 quarter

The vertically integrated manufacturer, Seprod Limited recorded a two-thirds dip in profits to $169.35 million for its June quarter due to higher expenses and the Jamaica dollar appreciation.

The decline started from its direct expenses which jumped 44 per cent to $2.27 billion compared with the 2009 same-quarter. That item alone slashed the group's gross profit to $457.5 million down nearly half compared with the same quarter 2009 but the results would worsen when foreign exchange (FX) losses at $143 million were included. In the corresponding quarter in 2009 FX gains were $34 million.

PB Scott, Seprod's chairman at last week's annual general meeting told investors that the group would retain its holding in US dollars despite the fluctuation of the currency.

The Jamaica dollar closed trading at $85.80/US$1 on Monday having appreciated some four per cent in three months, which is its first significant appreciation since 1992. The strengthening dollar has been linked to an infusion of hard currency into the island due to the International Monetary Fund (IMF) stand-by agreement with government totalling US$1.3 billion. Over 20 years the local currency slid from $7.00 to 41.49 to $89.50 between January 1990, January 2000 and January 2010 respectively.

Seprod's other expenses declined namely its administrative and selling expenses indicating that the group continued it efficiency drive which led to record profits in its 2009 financial year.

Its cash flow and equivalents balance during six months ending June 2010 ended was $144.6 million versus $395.1 million in 2009. The reduction in the net profit was the main reason for the decline in cash.

Segment results indicated that manufacturing earned $593.4 million in profit from $3.6 billion in revenues; and distribution earned $105 million in profit from $1.8 billion in revenues. Both divisions recorded a dip in earnings compared with the year prior with manufacturing down 36.9 per cent and distribution down 25 per cent.

For its 2009 annual results, Seprod reported a 58 per cent improvement in net profit, which totalled $1.49 billion for its financial year that ended December 31, 2009. The group saw flat revenues at $9.5 billion but benefited from slashing expenses by $400 million despite inflation. The group said that it had participated in the JDX, and that the debt exchange, which saw the Government exchange out 99 per cent of its domestic debt for new bonds at lower rates and longer maturities, had a significant impact on the expected future cash flows form the group's investment portfolio.

Seprod outline in its previous financial statements that it had exchanged $685 million in Jamaican-denominated securities and US$1 million ($89 million) in US-denominated securities in the JDX.

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