Jetcon regains footing, but challenges remain

Jetcon Corporation’s September quarter was its best year to date, but the company would have to pull off a spectacular finish if it is to match its full-year performance in 2018.

That would take earnings of about $47 million in the December quarter, which is doable for the company, whose best period since its 2016 market listing topped $48 million in September 2017. It’s seen near-similar results in two other quarters.

Jetcon recorded a 64 per cent rise in profit in the third quarter of this year to $21.53 million, up from $12.94 million. Profit over nine months now amounts to $45.4 million, down from $92 million.

Managing Director Andrew Jackson says the company is on better footing, having learned how to navigate developments in the market as well as its inventory problem.

“What is different is that we’re getting used to the new scenario, although it took a little while. In terms of inventories, we’re getting control of that now and, in a word, the water is steadier now,” Jackson told the Financial Gleaner.

The company, according to Jackson, had to adjust to the new importation regime, having to factor in long lead times on orders for cars that were tied under the pre-inspection regime imposed by Government. Pre-shipment inspection is done by Auto Terminal International in Japan.

Jackson says the regime, first introduced in January 2018, affected operations at Jetcon, which Jetcon attempted to manage by building up inventory. However, a slowdown in the market resulted in unsold cars on its lots.

That in turn led to discounted prices to drive business, and Jetcon’s revenue and margins fell as a result. Sales are down 16 per cent year to date at $746 million, compared to $895 million last year. Gross profit declined 19 per cent to $125.5 million.

Based on October and November orders, Jackson says he is optimistic that Jetcon will at least match, and possibly surpass, the $1.16 billion in annual revenue recorded in 2018.

“We’re looking pretty good. The third quarter was looking up and the fourth quarter is already better, so yes, we’re looking at in excess of $1 billion in revenue,” Jackson said, adding that the pre-inspection system, despite the delays, is helping Jetcon’s business.

“We’re getting better quality cars now, without a doubt. We’re having less issues with them, like less warranty claims, despite the long wait time which is getting better,” he said.

Jetcon is also scaling back on plans to act as a trans-shipping agent to other Caribbean islands and wholesale supplier to other used car dealers, He says the company has reduced its footprint at the Tinson Pen facility in Kingston, where operating space has been reduced from one to two acres and fewer cars are stored. The facility at Tinson Pen would have operated as a bonded warehouse so that no duties are paid until the units are actually moved from the complex.

“The truth is, some of the things we expected to happen have not materialised, and so we’re pulling back from that to save costs,” Jackson said, noting that the company rode out the one-year lease and is saving US$10,000 per month going forward.

In the meantime, the company has invested in another piece of property at 14 Molynes Road, next to its main complex. Jackson declined to comment on the cost of the transaction and is still weighing how to utilise the property, which housed makeshift residences, in what is usually referred to as a ‘tenement yard’, and a tyre shop.

“For the time being, we’ll use it for storage,” the auto dealer said.

neville.graham@gleanerjm.com