Home' Trinidad and Tobago Guardian : June 8th 2014 Contents JUNE 8 • 2014 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG13
Today we look at the results
of one food company that is
adversely affected by the pref-
erential treatment given to
dairy farmers in the USA and
Most governments give targeted indus-
tries a range of subsidies that are intended
to achieve a variety of ends, ranging from
stimulating growth, ensuring national
security (for certain products) or con-
trolling costs (eg fuel and food). The costs
and benefits of these measures is a huge
and controversial area that some readers
may find interesting to explore.
We end the article by indicating what
strategies the company has started to
employ to regain lost territory and how
it is going after more affluent consumers.
These strategies are geared to improving
its profitability for the ultimate benefit
of its shareholders.
Flavorite s 2013 results reflect the effects of
modest growth in an increasingly competitive
market and the one-off effects of its efforts
to streamline and restructure its operations.
Total assets increased by 4.9 per cent to
$129.2 million from 2012 s $123.2 million. Non-
current assets declined by $3.2 million while
current assets rose by $9.25 million.
Plant, property and equipment fell to $55
million from $57.4 million as at December
2012. New additions totalled $4.79 million, of
which, plant and machinery accounted for
$2.85 million. However, depreciation charges
of $5.9 million and disposals of $1.2 million
resulted in a lower year-end balance.
Inventories increased by 17.5 per cent, from
$37.1 million in 2012 to $43.6 million last year.
The most significant increases were recorded
in the values of raw materials and finished
goods. The former rose to $10.3 million from
the previous year s $7.6 million while the latter
increased from $16.4 million to last year s
While the company experienced top line
growth of 10 per cent, the higher growth rate
of its inventories should help it to deliver a
more consistent flow of products to its fickle
and demanding customers.
Trade and other receivables increased from
$22.6 million as at year-end 2012 to $24.9
million as at December 2013. Of this sum,
$20.4 million comprised trade receivables.
This figure was 10.2 per cent higher than the
$18.5 million recorded for 2012. This change
is consistent with the higher level of sales.
While the other receivables component
declined by almost $0.7 million, the prepay-
ments element advanced by more than $1 mil-
FFL s stock of cash rose to $1.58 million
from the 2012 level of $1.42 million.
Total liabilities expanded by $8.5 million to
end 2013 at $88.2 million from the previous
year s $79.7 million. Similar to its asset move-
ments, non-current liabilities declined while
current liabilities increased.
Non-current debt declined to $25.2 million
from $27.1 million a year earlier. On the other
hand, both retirement and severance obligations
and deferred tax liabilities posted modest
Trade and other payables rose to $33.6 mil-
lion from the 2012 level of $26.3 million, reflect-
ing an increase of almost 28 per cent. The
largest component, trade payables, rose by
31.8 per cent to $28.3 million from the previous
year s $21.5 million.
Current borrowings rose from $10.9 million
as at December 2012 to $14.3 million last
December. The primary increase was reflected
in its bank overdraft balance, which rose to
$8.6 million from $5.7 million. The interest
rate on this secured facility is a competitive
7.5 per cent.
On its bankers acceptance facility, which
was almost unchanged at $2.25 million, FFL
pays 6.5 per cent interest. These interest rates
are consistent with the company s good credit
rating, which is a logical by-product of dis-
Ratios and gearing
In 2012, current assets exceeded current lia-
bilities by 40.6 per cent, reflecting a surplus
of $17.8 million. As at the end of 2013, this
percentage was 31.9 per cent and had a value
of $17.1 million.
The total capital employed in 2012 was $80.16
million. Of this figure, the debt portion was
45.7 per cent.
In 2013, total capital employed declined mar-
ginally to $78.97 million. The debt portion rose
slightly to 48 per cent, largely due to increases
in bank loans and overdraft facilities.
Shareholders equity declined to $34.4 mil-
lion from the 2012 level of $35.8 million. This
fall was primarily due to the loss of $1.27
million sustained for last year.
Based on those changes, the book value of
each share declined to $4.42 from $4.61 as at
Revenues and profit
Revenues increased by 10 per cent to reach
$163.4 million; in 2012, this figure was $148.5
million. On the other hand, the cost of sales
rose by 14.9 per cent to reach $95.7 million
from the 2012 level of $83.3 million.
The higher costs of raw materials and con-
sumables used were the most significant con-
tributors to this result. This line item rose to
$92.7 million from the 2012 level of $68.5 mil-
These changes saw FFL deliver a gross profit
of $67.7 million, which was a mere 3.7 per
cent greater than the $65.3 million recorded
At $37 million, administrative expenses were
$2 million lower than the 2012 figure of $39
million. In contrast, distribution expenses rose
by $3.2 million to $26.6 million from $23.4
million in 2012.
In 2012, there was an impairment charge
to accumulated goodwill of $17.3 million (a
non-cash transaction), which was largely
responsible for FFL reporting an after-tax loss
of $14.8 million.
In 2013 FFL reported a pre-tax profit of
$228.6 k. (2012: Loss of $16.6 million). Helped
by a deferred tax credit of $3.1 million in 2012,
there was a tax credit of $1.75 million for that
period. In 2013, there was a positive deferred
tax charge of almost $1 million, which saw
FFL incur a total tax bill of $1.5 million.
The after-tax loss for 2013 came in at $1.27
million; this figure translated into a negative
EPS of $0.16.
First quarter 2014 results
Very quickly, FFL has returned to profit,
which has been attributed to the implementation
of cost saving measures in the earlier period.
Revenues improved by 11.4 per cent to $41.15
million from $36.9 million in the first quarter
of 2013. Pre-tax profits registered at $465k;
this is an improvement of 142 per cent over
the $191.7k earned in last year s comparative
The after-tax profit came in at $251.6k,
which is almost three times greater than the
amount reported for the 2013 period ($86.5k).
EPS for the first trimester was $0.03.
Last June, the share price was $8.30. On a
volume of only 150 shares the price fell to
$8.22 on August 14, 2013, where it remained
for several months.
Following the release of its 2013 results,
2,000 shares of FFL then traded at $7.00 on
March 27, 2014. At the end of April another
1,000 shares were traded and the price fell to
$6.80. The most recent trade occurred on May
16, 2014, when 50 shares changed hands at
Ownership in this company is heavily con-
centrated in few hands and trades are not reg-
The company has a three-pronged strategy
for combating the negative effects of sub-
sidised imported milk and dairy products.
First, it is streamlining its cost structure.
This includes the closing of unprofitable oper-
ations and making adjustments to the man-
ufacturing process. Much of this was done
Next, it is increasing its contract manu-
facturing for leading ice cream brands, both
for the local and regional markets.
Finally, it is developing its franchising of
the premium Coldstone Creamery brand.
This is being done by its subsidiary, Sundaes
Ltd, which pays an annual franchise fee of
This franchise currently has four outlets
located at: UWI, two MovieTowne locations
and one at Trincity Mall. It seems reasonable
to assume that Flavorite would begin to man-
ufacture and supply products to these outlets
(and others) in the not too distant future.
Meanwhile, the acquisition and develop-
ment of Romike Ltd, a profitable meat and
beans distributor, has added an important
new dimension to FFL s recovery and diver-
fights backFelix Pereira
Links Archive June 7th 2014 June 9th 2014 Navigation Previous Page Next Page