Seprod Q2 bottom line singed by subsidiary
Published:Wednesday | August 21, 2024 | 12:08 AMNeville Graham/Business Reporter
The expiration of one-off benefits available to subsidiary AS Bryden and to unexpected costs for procurement of foreign exchange drove profit down at manufacturing and distribution company Seprod Limited.
Despite a modest increase in top-line sales, Seprod’s earnings shrank 21 per cent on account of the performance of subsidiary AS Bryden & Sons Holdings Limited.
For the second quarter ended June, the Seprod Group achieved revenues of $29.74 billion, a nine per cent increase over the corresponding period in 2023. Group CEO Richard Pandohie says the increase came from a big jump in exports and more aggressive marketing on the beverage side of the business.
Pandohie said the company managed to snag the rights to use the image of the Minions in blockbuster animation movie series Despicable Me, for which the deal was signed with Universal Pictures in early 2024. This led to the repackaging and repositioning of the Monster Milk product, and a revenue boost because of it.
“It may look like a small detail, but that move alone pushed up sales by 50 per cent. We continue to look for activities like those to drive sales,” Pandohie said.
The revenue increase did not find its way to the bottom line. Net profit was down by $245 million, or 21 per cent, to $941 million.
“The major contributor to the group shortfall was due to its Trinidad subsidiary’s performance. The Bryden Group’s revenues increased by 11 per cent over the comparative period; however, its net profit declined by 44 per cent, primarily due to expiration of one-off benefits which the company had in 2023 and to higher-than-planned finance costs to acquire foreign exchange,” Seprod said in the summary of its financial report.
Pandohie said the sourcing of foreign exchange for Bryden was to facilitate its recent acquisition of a 44.8 per cent stake in speciality food purveyor Caribbean Producers Jamaica Limited, CPJ, a company founded by Mark Hart and Tom Tyler.
Caribbean Producers is now under AS Bryden’s and Seprod’s control, with Pandohie as the newly installed CPJ chairman.
A new chief executive has also been installed and Seprod is now focused on integrating the CPJ operation into the group.
“CPJ is a good operation with a lot of potential and we’re going to deliver,” Pandohie said, adding that the good outlook for CPJ should inure to the benefit of Bryden Group and, by extension, Seprod as the overall parent company.
Regarding other aspects of its operation, Seprod said the group is now regaining lost margarine market share, which occurred during 2023 when the company embarked on a massive plant upgrade. In addition, the company has put a heavy bet on its beverage manufacturing operation.
Chief Financial Officer Damian Dodd said juice and dairy beverage demand continues to be strong, and that based on growth projections, Seprod decided to spend well over $700 million to increase capacity in processing and packaging. Pandohie expects that by the time the upgraded system goes live in January of 2025, there should be at least a 25 per cent increase in overall capacity.
The project was done in two phases.
“The processing capacity project is now closed and that will go live right now. That should result in about a seven or eight per cent increase in capacity,” said Pandohie. “The next phase is to address packaging. That should push us up to a 25 per cent increase in capacity, and that should close out in week one or two of January 2025,” he added.
Pandohie is positioning Seprod as a manufacturing hub that takes on contracted jobs, in addition to dealing with its own needs.
“The co-manufacturing is very important for us, and we continue to work with our partners in that regard. We’ve signed some really good deals, and we continue to grow. We have put in the investment; and what others have come to us to say is that they will not put in additional investment, but rather, use our capacity. So, it’s a win-win,” he said.
A large part of the export boost came from co-manufacturing deals, he added, while noting that export sales grew by 27 per cent, meeting expectations.
“Exports did everything we wanted, and then some. What we can say is that this is the way to go. It is a way to utilise our full capacity, while earning foreign exchange at the same time,” Pandohie said.