DESPITE a 14 per cent reduction in first-quarter profits, the management of Seprod Limited has said it will not relent as the manufacturing and distribution conglomerate remains optimistic about fulfilling its growth strategy this year.
During the three-month period ended March 31, Seprod saw some $86 million of its profits erode to total $546 million when compared to the same quarter last year, amid a 5 per cent increase to its top line which recorded $9.5 billion in revenues.
The reductions in profitability were largely attributed to increased operational costs and supply chain challenges compounded by the continued presence of the novel coronavirus pandemic.
“The dairy business was tremendously impacted by the rains in November and December 2020 which caused over $300 million in infrastructural damage and reduced milk supply, all of which impacted the Q1 performance. Recovery is in progress and we are on track to be back in full production during Q2,” the company said in its recently posted interim report to the Jamaica Stock Exchange (JSE) while noting that delays to its annual report were being sorted, with the publication to be made available at the end of this month.
Seprod's CEO Richard Pandohie, commenting on the first-quarter performance, said that interventions made by the company to repair some infrastructural damage have resulted in current production levels climbing to 93 per cent, though at a slower pace for some dairy farms.
“We will be working with these farmers to try to get their production back up,” he told Sunday Finance.
He added that based on the increased cost of raw materials due to global supply chain challenges and expert projections, changes were not expected any time soon and as such price increases in the second quarter will be an imminent reality for his company. “We are doing everything we can to manage the extent of the increase, including implementing cost containment measures throughout the entire organisation,” he stated.
Pandohie in his outlook said that given the level of unpredictability which has so far characterised this year, the company remains cautiously optimistic. This, he said, was tied to the global roll-out of vaccinations which he hopes will effect good recovery trends in major source markets.
Notwithstanding the current challenges, Pandohie however said that the company continues to be centred on driving exports [which increased by 16 per cent in Q1], improving productivity and to rolling out new products.
“We just launched Nutriplus milk, which will be placed in the retail trade over the next month, and we anticipate it will be a growth driver in Caricom. Other exciting new products are on track but we will keep those close to our chest for now. We also have two new markets that we will be shipping to in July and work continues at full pace to complete our distribution campus by the end of the first quarter next year. The warehouse element is still on track for completion in December this year,” Pandohie said as he provided updates about the company plans to Sunday Finance.
Following an 86 per cent increase in profits last year and $38 billion in revenues, the CEO in previous projections stated that the company was looking to outperform this by increasing revenues by six per cent or $2.4 billion this year, accompanied by normalised net profit gains of 13 per cent.
“Management remains confident that our projections for the financial year will be met or exceeded,” the company's directors also said in the quarterly report.