The management team at Jamaica Producers Group Ltd (JP) has defined success as the ability to effectively adapt to change.

With the group’s managing director, Jeffery Hall and Chairman, Charles Johnston leading the way for JP’s drastic turnaround, the company is now strategically positioned to reap fruitful gains in the long term.

The leaders’ tenacity was exemplified in their painful decision to cease producing bananas for export to the UK last year and exit its loss-making subsidiary, Serious Foods Group, to completely redefine the Company’s operations. However, in spite of unforgiving global economic conditions, JP’s team took the bull by the horns and successfully transformed the struggling banana producer into an internationally recognised and profit-bearing fruit processor.

Turning to the Company’s recently released financial results as evidence to JP’s transformation success, one would find a profit of $156.92 million for the 40-week period ended October 10, 2009 (40wks 2009), compared with a hefty loss of $1.15 billion in the corresponding period last year. The numbers for the quarter were just as impressive, as JP reported earnings per share (EPS) of $0.30 versus a loss per share of $2.75 a year earlier. This is the third consecutive quarterly profit recorded by the newly refocused JP, a feat that is sure to silence critics who suggested in May when the company released its first quarter (Q01 2009) results, that its return to profitability may be unsustainable.

However, this uncertainty was not completely unjustifiable against the backdrop that JP reported consecutive quarterly losses for an extended period of time. Additionally, critics pointed to the $20.57 million loss from operations incurred by the company in Q01 2009, as their basis for not tipping their hats to JP’s board of directors just yet. However, what they failed to recognise is that the company narrowed its loss by $144.1 million from $164.68 million in the corresponding period last year. Furthermore, as expected, JP’s marketing, selling and distribution costs were higher in the quarter, jumping to $26.79 million from $2.96 million – a warranted expense as the company launched its new face.

Taking a closer look at JP’s Q01 2009 numbers, one must recognise that revenues from continuing operations increased almost four fold to $1.3 billion, significantly up from $339.65 million a year ago. This was mainly driven by strategic changes to the Group’s JP Europe Division and JP Tropical Division, which provided an early indication that the company’s new vision had begun to penetrate the marketplace. Now, two quarters later, JP’s results speak for itself, solidifying its capability to continue producing positive earnings growth in the future.

For JP’s 40wks 2009 period, revenues from continuing operations remained on their upward trajectory, more than doubling to $4.74 billion versus $2.2 billion in the comparative period last year. However, more notably, JP recorded a profit from operations of $65.18 million, up from a loss of $509.84 million a year ago. This was also the case for the company’s six month period ended June 20, 2009, as profit from operations came in at $38.29 million, compared with a loss of $299 million a year earlier. For fiscal 2008, JP posted an annual loss from operations of $560.42 million after ending each quarter in the red.

JP’s ability to turnaround several quarters of operating losses into consecutive quarterly operating gains, speaks highly to the carefully calculated decisions made by Hall and his team. After having to face the elephant in the room and part ways with its oldest operations, which had been persistently hard-hit by hurricanes and its UK-based Serious Food Group, JP sought to grow its earnings by expanding further into Europe. In 2008, the company acquired Netherland-based Hoogesteger Fresh Specialist BV, which has become the Country’s leading fruit and smoothie maker and is now the primary contributor to revenue and earnings in JP Europe, as well as the overall Group.

While JP’s strategy to boost its revenues by exploring the overseas market positively translated to its bottom line, the company should consider expanding its presence in the local market. Due to the management team’s wealth of experience locally and the dominance of the JP brand, the company is ideally poised to further strengthen its business lines. With an already established distribution channel the company has the capabilities to play a more dominant role as a local distributor. It has the flexibility to broaden its product line, using its brand to enter into markets other than snacks. The rapid growth and popularity of its snack business is a testament to its potential if it were to venture into other products.

Turning to the Corporate side, JP has the opportunity to increase its value to its shareholders by re-evaluating its position in GraceKennedy Ltd (GK). Currently JP owns a 9.88 per cent stake in GK or 32.78 million shares, making them the largest shareholder as at December 31, 2008. If the company were to offload its GK shares and recognise the opportunity cost of maintaining its holdings in GK – additional interest income -JP would be able to boost its earnings per share (EPS)

by approximately $0.88. Certainly, this is another option for JP as it looks to achieve sustainable growth.

While JP faced a daunting challenge to quell investor fears, its response not only proved its resilience but also the ability of its management team to make critical decisions in tough times. Recognising that the biggest piece in the puzzle is identifying exit points, the leaders at JP are sure to continue steering the company towards abundant gains. With its new vision and appetite for change, as well as its wealth of opportunities, JP is poised to achieve sustainable growth. Investors should consider picking up this stock at current levels, if they can get a hold of it.

Juvenne Yee is a Research Analyst at Stocks & Securities Ltd. You can contact her at jyee@sslinvest.com.