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Pandemic shelves Seprod expansion, cuts half-year profit

Published:Friday | September 24, 2021 | 12:06 AM
File 
Richard Pandohie, CEO of Seprod Limited, shows off some of the company’s products at his Felix Fox Boulevard office, off Marcus Garvey Drive in Kingston.
File Richard Pandohie, CEO of Seprod Limited, shows off some of the company’s products at his Felix Fox Boulevard office, off Marcus Garvey Drive in Kingston.

The planned completion of the expansion in the distribution business of manufacturing and distribution company Seprod, which was set to come on stream at the end of September, has been delayed. The company is now looking for the project to happen six months from now – in March 2022 - even as it sees slightly better half-year income but lower profits.

Seprod CEO Richard Pandohie says that although 2020 was the best-ever year for the company that made nearly $38 billion in revenues in the first year of the COVID-19 pandemic, the business was unable to carry out its plan to capitalise on that success by pushing through the expansion. Ongoing logistical challenges thrown up by the pandemic have been blamed for the delay.

“This project was initially scheduled to go live at the end of this quarter, but due to supply chain disruptions affecting material delivery, the new go-live date has been set for the end of Q1 in 2022,” Pandohie told shareholders at the company’s annual general meeting, held virtually earlier this week.

The expansion started in mid-2020, with a price tag of more than $2.5 billion to build out and consolidate Seprod’s warehousing operation and create a mega distribution hub.

Seprod acquired the assets and brands of the consumer division of the Facey Group at the end of 2018 in a $53.8-million deal. The former Facey division added 11 brands to Seprod’s portfolio, including Eve, Delite, Kraft, Nabisco, Brunswick, and Arm and Hammer – a move that significantly boosted revenues at Seprod. Between 2012 and 2017, top line revenues oscillated between $12 billion and $15 billion. That grew past $22 billion in 2018, then jumped to $32.7 billion in 2019 and a best-ever $$37.7 billion in 2020.

Since the acquisition, Seprod consolidated operations at its main Marcus Garvey Drive plant in Kingston and partially shuttered the former Facey Group facility at Newport West. It also divested the former Industrial Sales complex at Marcus Garvey Drive to the Eppley Caribbean Property Value Fund, with which it is affiliated. Both entities are members of the Musson Group.

Pandohie told shareholders that the distribution upgrade is a critical part of the company’s operation, which is intended to secure greater efficiencies and even bigger revenues.

The setbacks, the Seprod CEO outlined, have included the increasing cost of goods, hiccups in receiving timely supplies, compounded by the rising cost of shipping.

The upshot for the half-year to June, according to Pandohie, is that revenue of $19.83 billion was up seven per cent year-on-year, but sales volumes fell. He said the company continues to absorb some of the increased costs, which is now showing up in a seven per cent year-on -year decrease in profit at half-year. Profit was $1.2 billion, down $93 million over the same period last year.

Meanwhile, the Seprod CEO is bemoaning vaccine hesitancy among his workforce. Pandohie says the company has been advocating vaccination for all, to include personal and family safety, business continuity and Jamaica’s recovery. He said while it has not been easy convincing persons, in the past few weeks there has been a positive shift in momentum to get vaccinated.

“As of today, 34 per cent of our workforce has been vaccinated. This is well below what is required and presents a significant risk to the business. This situation is untenable and the company is exploring all options to reduce its exposure,” he said on September 20.

neville.graham@gleanerjm.com