Sweet River business model under review
Published:Friday | September 27, 2019 | 12:23 AM
Managing Director of Sweet River Abattoir Valdence Gifford says the company is making headway in staunching its losses, but needs to make changes to its business model for its long-term health.
In the quarter ending June, the Westmoreland-based pork supplier made a net loss of $1.56 million, but it was a better outcome than the $7.06-million loss in the similar period in 2018. Losses shrank 78 per cent in the quarter.
Sweet River’s business model is one of procuring, slaughtering and producing choice cuts from pigs, according to Gifford. These products are then sold to hotels, wholesalers, retailers and restaurants.
However, the model is not translating into profits, he said.
“The challenge with that model is that in selling large volumes, the market is giving us a price that squeezes our margins – and that is not sustainable,” Gifford told the Financial Gleaner.
He says revenue for the quarter came from slaughtering fees and inventory sales. Sales were down 70 per cent to $22.85 million at the end of June, from $77 million in the 2018 period.
Gifford says Sweet River is performing better, due to the ongoing reorganisation of the company, but that the cost of procuring pigs for slaughter was putting too much pressure on the operation.
“It is something that we’re taking a serious look at: whether we should combine both models by doing a portion of our business along the lines of procurement; and the other by offering slaughtering services and selling on contracts,” he said.
“We will have to look at the price we pay to farmers, our overheads and the price at which we sell. We’ve engaged a cost accountant, who should be able to give us those numbers by month end,” Gifford said.
Three-day workweek
All 30 Sweet River staff remain employed, he said, but their 40-hour workweek has been cut to 24 hours, or 3-day workweek. Otherwise, the ongoing considerations for cost savings include switching to solar energy to power its refrigeration system, and the sinking a well and using the abstracted water for processing and washing down of the pens.
Sweet River remains suspended from trading on the Jamaica Stock Exchange until it brings the composition of its board of directors into compliance with market rules. Gifford says they expect to name a new board by the third quarter, which for Sweet River would end in December.
The company is also negotiating with First Global Bank for time to comply with a demand by the bank to immediately repay a $116-million loan used to finance the construction of a new abbattoir on which payments have fallen into arrears.
“We have asked for an extension and I am confident that it will be granted. In the meantime, we are looking at a mix of divestment and new financing arrangement in the next four to six weeks that should help,” Gifford said.