SPUR Tree Spices is appealing to its investors to be "a little patient" with their short-term expectations as the company focuses on building a first-class global brand that will bring significant improvements in revenues and profits in the medium to long term.
The company, which listed a year ago on the Junior Market of the Jamaica Stock Exchange (JSE) reported third quarter profit grew 14.6 per cent to $29 million while revenues dipped 6 per cent during the same three-month period to $233 million. In the previous six months, profits grew 95.5 per cent and revenues went up 19.5 per cent. (Spur Tree Spices' financial year runs from January 1 to December 31. Its third quarter corresponds with the period from July 1 to September 30.)
However, while the overall performance remains positive with profits still recording growth, investors left nervous by the slower performance in the third quarter are being told that the medium- to long-term outlook is bright, especially with recent "strategic investments" yet to start paying dividends.
"A lot of investors do see, like we the management team here has, that this company has great potential. We know the strength of the brand based on the interaction with our customers and how well this brand is loved. And so one of the things that we have to do, and we have committed to do, is to build the brand the right way, and especially now that we have come to market and are publishing results every three months. While we want to provide good results every three months, and we have been doing that, we also want to ensure that we are not compromising the medium- to long-term strategic objectives by going strictly after short-term results," Albert Bailey, CEO of Spur Tree Spices, told the Jamaica Observer.
The long-term "strategic objectives" Bailey is referring to are the four investments Spur Tree Spices made in the last year. Those include the expansion of the Exotic Products factory in St Thomas to double production capacity, the purchase of a building in Port Morant, also in St Thomas, to establish a production facility, the purchase of controlling interest in Canco Limited — an ackee and callaloo canning company which markets its products under the Linstead Market brand — and the upgrade of Spur Tree Spices production capacity at its factory at the Garmex Freezone in Kingston.
"These investments are going to be what we call significant game changers down the road. The resulting revenues and profit that will be coming from them are going to be amazing, but we want to do it right," Bailey told the Business Observer.
He argued that Spur Tree Spices could have opted for short-term revenues to please its investors, but said doing so might not fit with the long-term strategy of the company.
"In terms of our trajectory, in terms of the prospects that this business has and what we envision will be happening over the next years, it is still aligned with what we want to do from the outset, and that is to build a real international Jamaican brand that has a wide reach in the provision of food and food services related items, and also in relation to that, to look at areas in the business where we can gain greater efficiencies, so we might get into areas of business that support our core business."
He explained further: "It would not be surprising for us to get into certain elements of business that support our core business. What if there's an opportunity to invest in a bottle manufacturing facility? We could invest in that. That's the kind of the mindset that we have. It could also be a box making facility. Anything that is going to support and drive efficiency in our core business, because all of those are areas that we depend on heavily and we want to make sure that our business is resilient and we can have all the inputs to support the growth."
Bailey admits that the company has to look at the opportunities after results last year were impacted by a shortage of cans for its products.
"We had issues with cans. We had issues with bottles. We had issued with cartons and various inputs. We didn't have issues with most of the raw material because we have built out a pretty strong infrastructure where we process and store."
That includes working with farmers to ensure raw materials for the various products are secured.
"It is a two-pronged approach, building out Spur Tree Spices as a brand with the critical products and support business areas that fit into that brand, and then also looking at the supporting infrastructure and building relationships or investing in those directly to ensure that as you, as you grow the Spur Tree brand, you are also strengthening the infrastructure that supports the brand."
We are also exploring other opportunities for acquisitions, but these, again, are strategic acquisitions that once they're done, then we have to go in and we have to align them with this business and maximise the results coming out of those investments. So those are not things that you're going to see reflecting in the next quarter after those initiatives are are completed. But you're going to see the impact from six months to nine months, or maybe a year to a year and a half down the road, and you are going to say, 'wow, now we understand why they did this'."
"So the thing I want my investors to understand, is that we are building a solid foundation and we are going block by block, strategy by strategy in laying out what we see as the important medium to long-term objective that is going to really make this company worthy of the investment that they have put in," Bailey stated.
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