Lasco Distributors Limited (LDL) is to see a boost in profits of $31.6 million at the end of the December 31, 2010 quarter following a favourable settlement between the company and its co-distributor Johnson and Johnson (J&J).

The dispute arose from a warehousing and distribution agreement entered into between both companies on May 31, 2001, whereby premature termination of the contract by either party would require compensation providing for “company’s expenses for rental of office and warehouse spaces, rental of transport vehicles, depreciation of leasehold improvements and equipment, salaried employees, etc”. J&J terminated the agreement in May 2008 without providing the required six months notice to LDL.

According to a statement from LDL sent to Sunday Finance, on termination of the contract LDL and J&J were to pay each other any sums due, including receivables from customers of either company.

The dispute was settled, through arbitration on November 3, 2010. LDL had made a provision of $47 million in the previous financial year ended March 31, 2010 for the settlement. However, based on the settlement, LDL was required to pay $15.4 million, as such the over provision of the difference of $31.6 million will be written back to profit for the quarter-ending December 31, 2010.

The settlement should improve LDL’s financial results come December as the company reported flat pre-tax profit for the period ended September 2010. LDL’s pre-tax profit grew one per cent from $117.7 million for the six months to September 30, 2009, to $118.9 million during the corresponding period this year.

LDL listed on the Jamaica Stock Exchange (JSE) Junior Market in mid-October.

LDL comprises of a consumer division which oversees the distribution of more than 250 types of food, personal care and laundry products; and a pharmaceutical division.

According to the prospectus accompanying the company’s initial public offer, LDL was going to use the proceeds for general expansion purposes, including the expansion of its warehouse space and working capital for growth and business development comprising investment in the expansion of its product range and market development towards its goal of expanding market share.