Salada boosts exports as profits fall

Listed coffee-processing company Salada is giving greater focus to growing its export business after experiencing a year-end profit decline. In its September 2020 year-end results, the company revealed that net profit was down nearly 22 per, at just below $110.5 million, from roughly $141.4 million in the prior year.

The profit fall-off was more pronounced than the slight year-on-year decline in revenue as Salada managed to keep its top line above the $1 billion mark. The $1.067 billion total revenue for the year was four per cent below the $1.113 billion for 2019.

General Manager Dianna Blake-Bennett says the dip in overall revenues was not unexpected but the company’s export drive over the past 18 months is now bearing fruit. Export sales performance for the year was strong, improving by 26 per cent bringing revenues of $200 million in the year against $116 for 2019, according to Blake-Bennett. Salada’s strategic plan, she says, is centred on growing exports. The company has been strengthening relationships with distribution partners in each export market, and this is bearing fruit as sales have picked up, driven by consumption by Jamaicans overseas.

“Fruits of this labour have become readily apparent in key markets such as the United States. One major area of success this fiscal year is that our Jamaica Mountain Peak brand has been gradually crossing over to the mainstream market in key accounts in Florida and the tri-state area. We’ve seen consistent improvements in acceptance of our brands not only among the diaspora but in other major ethnic groups,” Blake Bennett told the Financial Gleaner.

While foreign sales numbers are increasing at a steady clip, domestic sales fell 10.5 per cent, she noted. This, the Salada general manager says, was attributable to the slump in economic activity brought on by the COVID-19 pandemic. The improved performance in exports has compensated somewhat for the weak home-market performance resulting in the relatively small decline in total revenues.

Costs a challenge

Costs, however, remain a challenge to the business. Blake-Bennett says the higher costs of raw materials, and the cess on imports, continue to inflate the cost of sales lines and ultimately impact profits. With this, the company’s management is keeping a keen eye on expenses.

“There are a few uncontrollable factors, such as the cess and the cost of beans, (but) management has continuously held expenses tightly as a mitigating strategy to compensate for these factors,” according toher.

The company has held total expenses in the region of 17 per cent of sales.

The company has been pointing to increased production costs, with a statement accompanying the financials making note of this. These expenses have had a dampening effect on profits. There was, for the year, a 25 per cent decline in operating profits, which fell from just under $170 million last year to $125.7 million in 2020.

Salada company officials are drawing on the numbers to press home concerns they have been raising with industry regulators.

“During the year, decisions of the regulator, Jamaica Agricultural Commodities Regulatory Authority (JACRA), to delay and deny permit requests for the importation of raw materials forced the use of higher priced raw materials to manufacture some of (their) flagship products,” Salada’s management said.

JACRA is mandating that Salada use 30 per cent local coffee in the blends used to produce coffee products. The Supreme Court, in November, tossed out Salada’s application for permission to apply for judicial review of JACRA’s decision. The company had argued that it was relying on a March 2019 JACRA waiver which allowed Salada to use 10 per cent local green beans. JACRA withdrew that permission in August 2020, directing that Salada should start using 30 per cent local green beans in their coffee products, beginning September 2020.

The regulator has cited the existing regulations governing the industry requiring that persons offering for sale in Jamaica, or export, roasted coffee made from imported coffee beans, must utilise a blend of not less than 30 per cent local coffee.

In dismissing the Salada application, the court noted that JACRA did not have the power to grant the waiver in the first place. Blake-Bennett says the company will be abiding by the court ruling.

“Salada is a publicly listed company and is law-abiding. The ruling remains as is and Salada will continue to look for new opportunities that will meet our mandate to continuously improve shareholder value,” Blake-Bennett said.

neville.graham@gleanerjm.com