Home' Trinidad and Tobago Guardian : October 13th 2016 Contents Seprod Ltd (SEP) is a Jamaican-
based agricultural manufac-
turing and distribution com-
pany. Its products range from
sugar and biscuits through to
juices, milk, cereals and oils
The three largest shareholders are Musson
(Jamaica) Ltd with 233.75 million shares or
45.26 per cent, the Coconut Industry Board
with 163.4 million shares or 31.65 per cent
and GraceKennedy Ltd Pension Scheme, which
owns 21.96 million shares or 4.25 per cent.
We will now review SEP s performance for
the year ended December 2015.
Changes in financial position
Total assets grew by 10.5 per cent to J$15.51
billion from J$14.04 billion as at December
Non-current assets rose from J$8.07 billion
to J$9.09 billion or by 12.6 per cent. Property,
plant and equipment increased modestly to
J$3.91 billion from J$3.82 billion. Total additions
contributed J$718 million, however, the partial
sale of Jamaica Grain and Cereals (JG&C)
reduced the gross figure by J$410 million.
Additions mainly reflected equipment upgrades
at both Serge Island Dairies Ltd and Interna-
tional Biscuit Ltd.
Available-for-sale investments fell to J$1.84
billion from J$2.75 billion. This decline reflected
the sale of its entire holdings in Government
of Jamaica securities (J$962 million).
The group continues to hold a 12.5 per cent
stake in a related company, Facey Group Ltd;
it also owns 34 per percent of that company s
preference shares, which pay dividends in US
A new line item is its investments in joint
venture valued at J$427.4 million, which rep-
resents its 50 per cent stake in JG&C; the other
half was sold on October 5, 2015.
Long-term receivables jumped from J$1.1
billion to J$2.58 billion. The largest item is a
loan to a related party, Musson International
Dairies Ltd, totalling J$1.45 billion. The total
loan of US$15.7 million is denominated in a
mix of both US and Jamaican dollars; it matures
in September 2020 and interest is charged at
12 per cent per annum, payable monthly. In
addition, there are other loans to Musson and
Facey companies totalling J$1.15 billion.
Biological assets declined from J$318 million
to J$250.8 million, mainly reflecting the lower
value of cows able to produce milk.
Current assets increased to J$6.42 billion
from J$5.97 billion. Both inventories and trade
and other receivables exhibited declines. The
former fell to J$1.75 billion from J$1.93 billion
mostly reflecting lower values for goods in
transit and finished goods.
In the latter s case, the reduction was from
J$1.96 billion to J$1.74 billion, mostly reflecting
lower sums due from affiliated and other enti-
The value of biological assets fell to J$510
million from J$659 million; this reflected lower
tonnage and values of sugar cane.
Cash and cash equivalents advanced to J$1.31
billion from J$584 million. This increase was
largely helped by cash provided by its operating
activities, which improved to J$1.8 billion from
J$0.65 billion. This reflected positive move-
ments in its accounts payables, biological assets
Total liabilities rose by 31 per cent to J$5.56
billion from J$4.24 billion.
Payables increased to J$1.98 billion from
J$1.25 billion, which mainly reflected an increase
from zero to J$686.3 million in the sums due
to an affiliate.
Total debt rose to J$3 billion from J$2.3 bil-
lion. The increases reflected new balances due
to Tetra Pak (J$263.5 million), NCBJ (J$390
million) and JMMB Merchant Bank (J$220
million). The current portion increased from
J$916 million to J$1.45 billion while the long-
term portion moved from J$1.41 billion to
Total equity increased from J$10.08 billion
to J$10.52 billion, of which J$575.4 million
related to non-controlling interests. Conse-
quently, shareholders equity improved to
J$9.94 billion from J$9.79 billion.
The largest component, retained earnings,
advanced from J$8.1 billion to J$8.55 billion.
The major contributors were the current year s
profit of J$866 million and a re-measurement
credit on pension and other retirement obli-
gations of J$72 million. On the other hand,
dividends payments of J$490 million reduced
the closing balance.
With 516,339,000 shares (net of treasury
shares) outstanding, each share had a book
value of J$19.26 (December 2014: J$18.96).
Income and profits
Revenues declined by J$229.3 million to
J$13.78 billion from J$14 billion. This reduction
was primarily concentrated under the distri-
bution businesses. Direct expenses declined
marginally to J$11.1 billion from J$11.2 billion.
Consequently, gross profit registered at J$2.66
billion, which was J$128.6 million or 4.6 per
cent lower than the 2014 figure of J$2.79 bil-
Among the notable cost changes was a
decline in utility costs to J$634 million from
J$924.9 million, which reflected the downward
movement in international energy prices. On
the other hand, feed, chemical and veterinary
supplies, which are mostly imported, increased
to J$481 million from J$274.4 million. Also,
staff costs rose to J$2.08 billion from J$1.82
billion; the current period included J$128.8
million in redundancy costs.
Finance and other operating income was
J$760.6 million from J$682.8 million; the most
notable increase was recorded under gains on
financial assets at fair values through profit
or loss, which climbed to J$212.4 million from
J$58.9 million (see the half-year results sec-
Selling expenses rose to J$510.6 million from
J$399.5 million while administration expenses
climbed to J$1.8 billion from J$1.42 billion.
Also, other operating expenses rose to J$213.9
million from J$197.6 million.
These changes saw operating profit register
at J$900.8 million; this reflects a decline of
J$559.6 million or 38.3 per cent from the 2014
figure of J$1.46 billion.
Finance costs, at J$290 million, was almost
identical to the previous year. However, foreign
exchange losses declined to J$52.8 million
(2014: J$84 million) while interest on long-
term loans rose to J$217.9 million from J$180.8
The share of losses from its former subsidiary
and now joint venture (Jamaica Grain & Cereals)
contributed a loss of J$6.7 million.
These movements produce a pre-tax profit
of J$604 million (2014: J$1.17 billion). The
effective tax rate more than doubled to 46.6
per cent from 23.1 per cent; this increase was
largely influenced by tax losses of J$237.4 mil-
lion of subsidiaries for which no deferred tax
assets have been created.
This resulted in a profit from continuing
operations of J$322.7 million versus J$900.4
million for 2014.
The profit from its discontinued operations
(JG&C) for the nine months of 2015 contributed
J$254.1 million (2014: Loss of J$5 million) to
the result, which ended at J$576.9 million
(2014: J$895.4 million).
The amount attributable to shareholders
was J$866 million while the loss relating to
non-controlling interests was J$289 million.
These results translated into 2015 EPS of
J$1.68 compared with J$1.96 for 2014.
During 2015, the company suffered from
three main influences: local currency deval-
uation, redundancy and other restructuring
costs and prolonged drought.
Both segments experienced declines in rev-
enues. In the case of the manufacturing com-
panies that fall could be explained by the Octo-
ber sale of JG&C.
Huge restructuring charges at Golden Grove
Sugar Company Ltd were undertaken as SEP
outsourced its estate farm operations. It will
now concentrate on manufacturing and mar-
keting its sugar and related products.
The reduction in its ownership to 50 per
cent from 100 per cent of JG&C, which makes
Pronto porridge, was done in order to facilitate
a major renovation and expansion of its oper-
Another manufacturer, Caribbean Products
Company Ltd, produces oils and fats under
the Chiffon and Gold Seal brands. Serge Island
Dairies Ltd produces Swizzle, Cool Fruit and
Delite juices; it also packages Cadbury and
Ovaltine brands for the local market.
Its main distribution company, Industrial
Sales Ltd, distributes both Seprod and Miracle
Share price and dividends
SEP s share price closed at J$13.70 on
December 31, 2014. During 2015, it continued
to move on a generally upward trajectory before
closing on December 31, 2015 at J$21.00. It
closed last Friday at J$22.60.
Despite operational and profit challenges,
the dividend increased from J$0.90 for 2014
to J$0.95 for 2015. At the recent price of
J$22.60, the yield is 4.2 per cent. Based on
2015 EPS, that price reflects a P/E multiple of
On July 16, 2016, SEP paid a dividend of
Revenues for the half-year ended June 2016
showed a small decline to J$7.6 billion from
J$8 billion; this largely reflected the sale of
JG&C. However, gross profit rose strongly to
J$1.74 billion from J$1.52 billion. Net profit
climbed by a robust 84.7 per cent to J$815.9
million from J$441.8 million. In turn, EPS
advanced to J$1.73 from J$0.99.
Of particular note was the increase in finance
and operating income to J$636.8 million from
J$223.2 million. According to a Jamaica Gleaner
article dated August 11, 2016, this improvement
was largely influenced by the huge appreciation
in the value of its shares in GraceKennedy
In GKC s 2015 Annual Report, Xaymaca Ltd,
a subsidiary of Seprod Ltd was listed as owning
(before the recent stock split) 9,063,461 shares
(2.74 per cent) in GKC. Last week, SEP sold
its entire holdings in GKC for a transaction
value of about J$1 billion; very likely, this was
done to help fund its expansion plans.
Also, last November, a related company,
Musson International Dairies Ltd, bought the
dairy operations of Nestlé Jamaica; conse-
quently, Serge Island Dairies added "Betty"
milk and "Supligen" products to its portfo-
lio.Divisionally, the distribution segment showed
a revenue improvement of 38.5 per cent to
J$3.45 billion (2015: J$2.49 billion) accompanied
by an 86 per cent surge in profit to J$64.7
million from J$34.8 million. The manufacturing
sector experienced a 25.2 per cent revenue fall
to J$4.15 billion from J$5.55 billion; despite
this, the segment result rose by 11.3 per cent
to J$928.6 million from J$834.5 million.
In 2014 and 2015, exports represented 4 per
cent of total revenues. Two mandates to the
new CEO are to increase exports to between
12 and 15 per cent of revenue and to grow its
local market share via import substitution.
The Dominican Republic and Haiti are its first
Next week, we turn our attention to
Republic Bank Guyana Ltd, which is a sub-
sidiary of RFHL.
OCTOBER 13 • 2016 www.guardian.co.tt BUSINESS GUARDIAN
COMMENTARY | BG15
Seprod re-tools for the export market
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