• Salada Foods Jamaica Limited (SALF) recorded a net profit attributable to shareholders of $47.51Mn for the second quarter that ended March 31, 2023, marking a 17.8% yoy increase in profitability. However, the company’s bottom line for the six-month period decreased by 8.9% to $74.88n when compared to the same period in 2022.
• Revenues for the quarter rose by 14.0% yoy to $394.22Mn, driven by robust performance and growth across all distribution channels. Despite a 13.9% increase in the cost of sales to $272.13Mn, it was slightly outpaced by revenue growth. Consequently, the gross margin was slightly higher in the March 2023 quarter at 31.0% (March 2022: 30.9%). Revenue for the six months was up yoy by 8.3% to $688.26Mn. This improvement can be attributed to strategic forward purchasing of raw and packaging materials.
• Selling and Promotional expenses for the quarter amounted to $23.22Mn, a 57.7% increase from the $14.72Mn for the corresponding period of the previous year. For the six months, the expenses rose by 7.4% to $75.91Mn. This surge is due to the company’s aggressive support for expansion into new markets, and its pursuit of innovative strategies, product development and diversification. Product diversification is a key strategy to mitigate the ongoing adverse impact of an inconsistent supply of local green coffee beans.
• SALF stock price has decreased by 12.5% since the start of the calendar year. The stock closed Thursday’s trading session at $3.65 and currently trades at a P/E of 22.8x which is above the Main Market Distribution & Manufacturing Sector Average of 14.2x.
• The inconsistent supply of local green coffee beans, a crucial raw ingredient, continues to hinder industrial productivity and operational effectiveness at the company. During the reporting period, Salada partnered with the Jamaica Coffee Growers Association (JCGA) to launch a coffee sustainability initiative “Grounds for Growth”. This initiative focuses on repurposing Salada’s manufacturing bi-products into optimal organic fertilizing material to help improve the quantity and quality of production by local coffee farmers in a cost-effective manner.

(Sources: JSE & NCBCM Research)

• The Central Bank (Banco Central de la Republica Dominicana (BCRD) reported that consumer prices rose by 0.24% month-over-month (M/M), and 5.15% year-over-year (Y/Y) in April, reflecting a decline of 75bps since March and by 449bp from a year ago. Core inflation stood at 0.32% M/M, 5.83% Y/Y, down 33bps from March and 146bp from its May 2022 peak.
• The BCRD projects full convergence to the target range (4% +/- 100bp) during Q2 2023. It reiterated that the declining inflation trend was the result of restrictive monetary policy coupled with targeted subsidies for gasoline and electricity.
• In April, food and non-alcoholic beverages accounted for half of the monthly inflation, while transportation registered deflation. Tradable goods' inflation was 0.20% M/M, while non-tradable items recorded a 0.29% M/M inflation rate.
• The successful disinflation policy suggests that the Central Bank may soon start easing monetary policy. Fitch forecasts that the BCRD will continue to hold interest rates at their current levels until later this year when they are likely to initiate a rate-cutting cycle. Fitch also projects headline inflation to average 5.6% y-o-y in 2023, down from 8.8% y-o-y in 2022, and fall to 4.9% by the end-2023 – just within the BCRD’s target range.
• Additionally, the DR economy is expected to record 3.8% GDP growth in 2023, far below the pre-pandemic average of 6.1% between 2015 and 2019, signalling that elevated rates have had the intended effect on domestic demand.

(Sources: Oppenheimer & Fitch Solutions)

• Ecuadorean President Guillermo Lasso, facing a fresh push to oust him from power, announced on Thursday a proposal to cut tax for middle-income earners and small businesses, but the bill faces long odds due to deepening political instability.
• The conservative former banker submitted the proposal to Congress, where he lacks majority support, using a fast-track procedure that could prompt a vote within 30 days.
• Lasso's tax reform pitch comes as lawmakers prepare to vote on a measure to remove him from office, following allegations that he turned a blind eye to embezzlement, which he denies.
• The tax proposal would benefit some 340,000 taxpayers and reduce revenue to government coffers by about $195Mn, from the $17bn collected in taxes in 2022.
• Lasso stated that the $195Mn would remain in Ecuadorian households for health, education, or food expenses. The tax reform proposal aims to modify changes he proposed to lawmakers at the end of 2021, which increased taxes on individuals who earned more than $2,000 a month by reducing the amount of health, education and other costs they can deduct. Those earlier tax changes became law after the sharply divided Congress deadlocked, allowing them to enter into force without a vote.
• However, the economy ministry described Lasso's new proposal as more "progressive and fair" in a statement. The bill would also introduce a tax on companies involved in sports betting platforms, as well as on the players, plus another levy for and another on organizers of public shows including concerts.

(Source: Reuters)

• The number of Americans filing new unemployment claims jumped to a 1.5-year high last week, pointing to cracks in the labour market as demand slows, potentially giving the Federal Reserve room to halt further interest rate increases next month.
• With demand cooling, inflation pressures are subsiding. Producer prices rebounded modestly in April, leading to the smallest annual increase in wholesale inflation in more than two years, according to data from the Labour Department.
• Economists believe these reports align with the expectation of a recession by the end of the year. "The Fed looks closer to winning the war on inflation today, but it risks losing the war on keeping the economy afloat and away from the shoals of recession," said Christopher Rupkey, Chief Economist at FWDBONDS in New York. Initial claims for state unemployment benefits increased by 22,000 to a seasonally adjusted 264,000 for the week ended May 6, the highest reading since October 2021. Economists polled by Reuters had forecast 245,000 claims for the latest week.
• Economists say claims in a 270,000-300,000 range would signal a deterioration in the labour market. Last week's surge could mark the start of an upward trend as the cumulative and lagged effects of the Fed's rate hikes broaden out in the economy. Layoffs, which were initially concentrated in the technology and housing sectors, appear to be spreading to other industries as companies gear for weak demand.

(Source: Reuters)

• Eurozone consumers raised their inflation expectations in March for the first time since the autumn, even as the rate of price growth fell and the European Central Bank kept raising interest rates, an ECB survey showed on Thursday.
• The median respondent in the latest Consumer Expectation Survey saw prices growing by 5.0% in the coming 12 months, up from 4.6% in the previous survey round in February, the first increase since October.
• Longer-term expectations also increased sharply, with inflation three years ahead seen at 2.9% after a 2.4% reading a month earlier. These rises are an unwelcome development for an ECB that is trying to stop the current high rate of price growth from becoming entrenched. The ECB decided to slow the pace of its interest rate increases last week but signalled more tightening to come in what markets expect to be the final stage of its fight against inflation.

(Source: Reuters)

• Wisynco Group Limited recorded a 38.6% yoy increase in net profit attributable to shareholders of $1.15Bn for the third quarter that ended March 31, 2023. Moreover, the company’s bottom line for the nine months increased by 23.8% to $3.66Bn when compared to the same period in 2022.
• Revenues for the quarter were up by 23.4% yoy to $11.97Bn, due to the resolution of production challenges from the second quarter, allowing the company to ramp up production and meet increasing demand. Despite an increase in the cost of sales by 19.2% to $7.83Bn, it was outpaced by revenue growth. Consequently, the gross margin was higher in the March 2023 quarter at 34.6% (March 2022:32.3%). Revenue for the nine months was up yoy by 26.9% to $36.05Bn.
• Selling, Distribution & Administrative expenses for the quarter amounted to $2.26Bn, a 26.8% increase from the $1.78Bn reported for the corresponding period of the previous year. The increase can be attributed to additional Marketing and Promotional costs. SD&A for the nine months ending March 2023 was up 29.5% yoy to $6.69Bn.
• Wisynco’s stock price has declined by 3.89% since the start of the calendar year. The stock closed Thursday’s trading session at $16.98 and currently trades at a P/E of 13.4x which is below the Main Market Distribution & Manufacturing Sector Average of 14.2x.
• Wisynco has major expansion plans with new buildings being constructed to boost its production capacity, enabling it to introduce new brands. This will be the largest capital expansion undertaken by the company in its history and represents a significant growth driver for its earnings. The flexibility and increased output resulting from this expansion programme will ensure that the company meets the current demands of local and export markets and pave the way for additional capacity for growth in varied product lines. The benefits of this CAPEX is expected to be realized midway through Fiscal Year 2024.

(Source: JSE and NCBCM Research)

• Costa Rica’s days of living beyond its means and running up reckless amounts of debt are over, said the nation’s president, whose fiscal turnaround is winning over currency and bond traders.
• “There’s a new sheriff in town,” President Rodrigo Chaves said Monday in an interview in the presidential palace. “Our country isn’t going to take on excessive amounts of debt with irresponsible deficits, as it did for the last 40 years.”
• After nearly a decade of repeated credit rating downgrades and a near-financial crisis in 2018, the nation dramatically reversed course over the last two years; and slashed the deficit under an International Monetary Fund Fund programme.
• The government posted a primary surplus of 2.3% of GDP last year, above its programme target of 1%, and the IMF said the government is on track to exceed this year’s targets too as the government has space to modify its fiscal rule.
• Notably, Fitch Ratings (BB-; Stable) and S&P Global Ratings (B+; Stable) both upgraded Costa Rica this year as the country outperformed its targets under the IMF programme.
• Additionally, Costa Rica’s currency has appreciated 15% since its congress approved the IMF deal in 2021, making it the best performer in the Americas. The nation’s dollar bonds are also among the world’s top performers over that period.

(Source: Bloomberg)

• The annual Consumer Price Index (CPI) rose to 4.9% for the year to April (March 2023: 5%), slightly less than the 5% estimate and the lowest annual pace since April 2021.
• Excluding volatile food and energy categories, core CPI rose 0.4% monthly and 5.5% from a year ago, both in line with expectations. Markets reacted positively to the news, with futures turning positive as Treasury yields were lower.
• The CPI reading has cooled considerably since peaking out at around 9% in June 2022. However, inflation still has held well above the Fed’s 2% annual target.
• The CPI reading comes just days after the Bureau of Labour Statistics (BLS) reported that nonfarm payrolls increased by 253,000 in April, above expectations and indicative that the labour market is still hot despite Fed efforts to cool demand.

(Source: Reuters)

• The Bank of England on Thursday hiked interest rates by 25 basis points and revised its economic projections to now exclude the possibility of a U.K. recession this year.
• The Monetary Policy Committee voted 7-2 in favour of the quarter-point increase to take the main bank rate from 4.25% to 4.5%, as the bank reiterated its commitment to taming stubbornly high inflation.
• The headline consumer price index rose by an annual 10.1% in March, driven by persistently high food and energy bills. Core inflation, which excludes volatile food, energy, alcohol and tobacco prices, increased by 5.7% over the 12 months to March, unchanged from February’s annual climb and reiterating the risk of entrenchment that the bank is concerned about.
• The MPC no longer expects the U.K. economy to enter recession this year, according to the updated growth forecasts in its accompanying Monetary Policy Report. U.K. GDP is now expected to be flat over the first half of this year, growing 0.9% by the middle of 2024 and 0.7% by mid-2025. The country’s newest GDP print will be published Friday.
• The economy has thus far shown surprising resilience in fending off a widely anticipated recession, with falling energy costs and a fiscal boost announced in the government’s Spring Budget improving the outlook.

(Source: CNBC)

• The announcement that a low-cost European airline will be expanding its services to the Caribbean, including Jamaica this winter season has been well received by the Ministry of Tourism. Norse Atlantic Airways will begin flying between London Gatwick to Kingston and Montego Bay in October this year. 
• Flights to Montego Bay will operate four times a week starting October 29, 2023, while Norse Atlantic Airways will fly to Kingston three times a week starting October 31. The fares for the new flights will start at £559 for a return trip.
• Delano Seiveright, Senior Advisor and Strategist in the Ministry of Tourism said the introduction of the new flights is not only significant for Jamaica but also for the development of Kingston, where the only other carrier with nonstop flights to London Gatwick is British Airways.  
• The tourism strategist predicts that there will be an increase in bookings due to the new flights, pointing out that visitor arrivals from the UK have already exceeded pre-COVID-19 levels. 
• The buoyancy in the tourism sector has been the main driver for economic growth since the reopening of the economy. This announcement will further put Jamaica in a position to benefit tremendously from increased arrivals, as the UK is one of the country’s main markets. Additionally, increased earnings from tourism will continue to drive economic growth.

(Source: RJR News)